FMC Tech Misses EPS, Beats Revenue

Zacks

Oil drilling equipment maker FMC Technologies Inc. (FTI) reported first quarter diluted earnings per share of 41 cents, below the Zacks Consensus Estimate of 45 cents. The weaker-than-expected results were mainly due to the effects of higher project costs and expenses on subsea margins.

However, compared with the year-ago period, FMC’s earnings per share improved by a handsome 28.1% – from 32 cents (adjusted) to 41 cents – on the back of strength in subsea and surface systems orders. The first quarter 2011 results have been adjusted for a one-time tax benefit.

Revenues at $1,396.6 million were up 29.1% year over year and were also above the Zacks Consensus Estimate of $1,393.0 million.

Segmental Analysis

Subsea Technologies: FMC is particularly well positioned in the subsea technologies market, where it competes with larger rival Cameron International Corp. (CAM). The segment revenue for the most recent quarter was $894.9 million, an increase of 29.8% from the first quarter of 2011, buoyed by a rise in sales of subsea systems.

Operating profit came in at $75.1 million, up 7.3% year over year. The positive comparison reflects higher sales, partially offset by steeper completion costs associated with a West African project, as well as sustained expenditure related to the expansion of headcount to support growth.

Surface Technologies: Segment revenues were up 29.7% year-over-year to $377.8 million. The main reasons for the improved performance can be attributed to the sales ramp-ups in the fluid control and surface wellhead businesses.

Segment operating profit, at $78.0 million, increased 51.8% from the year-ago period, driven by higher volume in fluid control and surface wellhead on the back of strong North American shale activity.

Energy Infrastructure: The segment revenue for the January-March period was $137.0 million, 33.0% above the first quarter 2011 level. This reflects better performance from measurement solutions and material handling in the quarter.

Operating profit came in at $9.3 million, compared with $4.5 million earned a year ago, pumped up by higher volumes in measurement solutions as well as material handling.

Backlog

As of March 31, 2012, FMC’s total backlog (after accounting for intercompany eliminations) was $5,599.2 million, compared to $4,573.2 million at March 31, 2011. Of this, backlog for Subsea Technologies was $4,688.5 million, while Surface Technologies and Energy Infrastructure backlog finished the quarter at $627.8 million and $285.4 million, respectively.

Balance Sheet

During the quarter, FMC spent $92.0 million on capital programs. As of March 31, 2012, the company had cash and cash equivalents of $361.6 million and debt of $741.7 million, with a debt-to-capitalization ratio of 32.2%.

Guidance

Management reiterated its 2012 earnings per share guidance in the $2.10 – $2.25 range.

Rating & Recommendation

FMC shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

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