Cameron International Q2 Earnings Top, Boosts Guidance Again

Zacks

Oil drilling equipment maker Cameron International Corp. (CAM) reported strong second quarter results, propped up by robust performance from its ‘Drilling & Production Systems’ segment, particularly in North America.

The Houston, TX-based company came out with earnings per share – excluding special items – of $1.00, ahead of the Zacks Consensus Estimate of 88 cents and the year-ago adjusted profit of 77 cents.
 

Cameron’s quarterly revenue, at a record $2,641.0 million, was up 19.6% year over year and was above the Zacks Consensus Estimate of $2,563.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,903.0 million in the second quarter, an increase of 32.3% from the year-ago period, while the DPS segment EBITDA rose 27.2% year over year to $304.0 million. The higher profitability could be attributed to strength in both its surface and subsea businesses.

Valves & Measurement (V&M): Quarterly revenues in Cameron's V&M segment totaled $536.0 million, essentially flat year over year. The segment EBITDA also remained static at $119.0 million, as strength in North America were offset by slightly tepid infrastructure activity levels in other parts of the world.

Process & Compression Systems (PCS): Revenues in the PCS segment fell 14.8% year over year to $202.0 million. The segment EBITDA witnessed a year-over-year deterioration of 13.0% to $20.0 million, on the back of operational hiccups.

Backlog

During the quarter, Cameron received orders totaling $2,436.0 million, up 8.8% year over year, reflecting a 12.4% jump in the DPS segment. The composition of current order booking is 70% for DPS, 21% for V&M and 9% for PCS.

As of Jun 30, 2014, Cameron's total backlog stood at $11,143.0 million, up significantly from the year-earlier level of $10,365.0 million, driven by sharply higher backlog in the DPS and PCS segments.

The backlog is expected to improve further and hit record levels by the year-end with North American outlook looking even better and a number of deepwater projects likely to progress during the next two quarters

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditures amounted to $73.0 million. Full-year spending is expected to be between $450 and $500 million.

As of Jun 30, 2014, cash and cash equivalents stood at $1,525.0 million, while long-term debt was $2,814.0 million (with debt-to-capitalization ratio of 31.5%).

Guidance

Cameron, which earlier in the year sold its reciprocating compression business to General Electric Co. (GE), upgraded its guidance for second time in the year. The company raised earnings per share projection (from continuing operations), specifying a new range of $4.00 to $4.25, over the previous range of $3.80 to $4.10. Management underscored the impact of continued margin expansion in the second half of 2014 and strong demand in North America. Meanwhile, the third quarter profitability is likely to be between $1.10 and $1.20.

Zacks Rank & Stock Picks

Cameron – which counts National Oilwell Varco Inc. (NOV) as its competitor – currently carries a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Another stock worth considering in the ‘Oilfield Machineries and Equipment’ sector would be Dril-Quip Inc. (DRQ). The company – also sporting a Zacks Rank #2 – has the potential to rise from current levels.
 

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