Cameron Misses Estimate, Grows Y-Y

Zacks

Oil drilling equipment maker Cameron International Corp. (CAM) reported first quarter earnings per share of 54 cents, missing the Zacks Consensus Estimate by a penny. The weaker-than-expected results were mainly due to tepid performance from the company’s ‘Process & Compression Systems’ unit.

However, compared with the year-ago period, Cameron’s earnings per share improved by a handsome 17.4% – from 46 cents (adjusted) to 54 cents – on the back of robust profitability from its ‘Drilling & Production Systems’ and ‘Valves & Measurement’ segments. The first quarter 2011 results have been adjusted for charges associated with the Deepwater Horizon incident.

Quarterly revenue, at $1,804.3 million, was up 20.2% year over year but was marginally below the Zacks Consensus Estimate of $1,806.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,042.1 million in the first quarter, up 20.4% from the year-ago quarter, while the DPS segment EBITDA rose 20.7% year over year to $169.7 million. The improved performance came on the back of higher level of subsea activity, where it competes with FMC Technologies Inc. (FTI).

Valves & Measurement (V&M): Quarterly revenues in the V&M segment totaled $491.2 million, up 44.5% year over year. The segment EBITDA increased 57.6% year over year to $102.9 million. The positive comparisons were driven by strong infrastructure activity levels throughout the world.

Process & Compression Systems (PCS): Revenues in the PCS segment decreased 8.4% year over year to $271.0 million. The segment EBITDA witnessed a year-over-year fall of 49.0% to $19.8 million, hamstrung by weak pricing and operational inefficiencies.

Backlog

During the quarter, Cameron received orders totaling $2,569.5 million, up 68.8% year over year, reflecting increases across all the segments. The composition of current order booking is 66% for DPS, 20% for V&M and 14% for PCS.

As of March 31, 2012, total backlog stood at $6,766.5 million, up from the year-earlier level of $4,892.7 million, driven by higher backlog across all segments.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditures amounted to $86.7 million. As of March 31, 2012, cash and cash equivalents stood at $662.5 million, while total long-term debt (including the current portion) was $1,607.7 million (with debt-to-capitalization ratio of 24.7%).

Guidance

Management reiterated its EPS guidance range for fiscal 2012 at $3.20–$3.30, while the second quarter profitability is likely to be in the range of 70–75 cents.

Rating & Recommendation

Cameron is currently a Zacks #3 Rank (Hold) stock, implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. We are also maintaining our long-term Neutral recommendation on the stock.

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