Cameron International Tops on Q1 Earnings, Sales

Zacks

Oil drilling equipment maker Cameron International Corp. (CAM) reported strong first quarter results, propped up by robust performance from its ‘Drilling & Production Systems’ segment. It reflected in its share price on the NYSE, where it rose almost 4% in early trade.

The Houston, TX-based company came out with earnings per share – excluding charges and discontinued operations – of 75 cents, ahead of the Zacks Consensus Estimate of 72 cents and the year-ago adjusted profit of 69 cents.

Cameron’s quarterly revenue, at $2,431.5 million, was up 18.0% year over year and was above the Zacks Consensus Estimate of $2,402.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,705.1 million in the first quarter, an increase of 34.4% from the year-ago period, while the DPS segment EBITDA rose 25.9% year over year to $249.3 million. The higher profitability could be attributed to strength in its subsea business.

Valves & Measurement (V&M): Quarterly revenues in Cameron's V&M segment totaled $492.3 million, down 5.6% year over year. The segment EBITDA decreased 14.0% year over year to $106.0 million. The negative comparisons can be attributed to slightly tepid infrastructure activity levels throughout the world.

Process & Compression Systems (PCS): Revenues in the PCS segment fell 13.4% year over year to $234.1 million. The segment EBITDA witnessed a year-over-year deterioration of 10.9% to $22.9 million, on the back of operational hiccups.

Backlog

During the quarter, Cameron received orders totaling $2,481.9 million, down 30.1% year over year, reflecting a 35.9% drop in the DPS segment. The composition of current order booking is 71% for DPS, 22% for V&M and 7% for PCS.

As of Mar 31, 2014, Cameron's total backlog stood at a record $11,269.1 million, up significantly from the year-earlier level of $9,918.8 million, driven by sharply higher backlog in the DPS segment.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditures amounted to $104.8 million. As of Mar 31, 2014, cash and cash equivalents stood at $972.1 million, while long-term debt was $2,563.1 million (with debt-to-capitalization ratio of 29.4%).

Guidance

Following the sale of its reciprocating compression business to General Electric Co. (GE) and the unit now being listed as ‘discontinued operations,’ Cameron management has revised its 2014 earnings per share (from continuing operations) guidance to $3.80–$4.10, against the earlier range of $3.60–$4.00. Meanwhile, the second quarter profitability is likely to be between 84 cents and 89 cents.

Zacks Rank & Stock Picks

Cameron – which counts FMC Technologies Inc. (FTI) 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 Matrix Service Co. (MTRX). The company – sporting a Zacks Rank #1 (Strong Buy) – has the potential to rise significantly from the current levels.

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