FTI's 1Q Earnings Miss, Sales Beat

Zacks

Oil drilling equipment maker FMC Technologies Inc. (FTI) reported first quarter diluted earnings per share of 43 cents, below the Zacks Consensus Estimate of 46 cents. The weaker-than-expected results were mainly due to tepid fluid control activity.

However, FTI’s per share profits came ahead of the first quarter 2012 level of 41 cents, amid strength in subsea systems orders.

Revenues at $1,646.0 million were up 17.9% year over year and also came above the Zacks Consensus Estimate of $1,583.0 million.

Segmental Analysis

Subsea Technologies: FTI 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 $1,092.2 million, an increase of 22.0% from the first quarter of 2012, buoyed by a rise in sales of subsea systems.

Operating profit came in at $99.4 million, up 32.4% year over year. The positive comparison reflects higher sales and better execution.

Surface Technologies: Segment revenues were up 11.6% year-over-year to $421.7 million. The main reasons for the improved performance can be attributed to the sales ramp-up in the international surface wellhead business, together with contribution from completion services revenue.

But FTI’s segment operating profit – at $57.3 million – decreased 26.5% from the year-ago period, hamstrung by depressed North American fluid control activity.

Energy Infrastructure: The segment revenue for the Jan-Mar period was $135.6 million, slightly below the first quarter 2012 level of $137.0 million.

Operating profit improved to $10.1 million from $9.3 million earned a year ago, helped by better showing in loading and separation systems.

Backlog

As of Mar 31, 2013, FTI’s total backlog (including intercompany eliminations) was $5,426.8 million, compared to $5,599.2 million a year ago. Of this, backlog for Subsea Technologies was $4,621.6 million, while Surface Technologies and Energy Infrastructure backlog finished the quarter at $522.3 million and $291.9 million, respectively.

Balance Sheet

During the quarter, FTI spent $78.9 million on capital programs. As of Mar 31, 2013, the company had cash and cash equivalents of $236.6 million and long-term debt (including current portion) of $1,680.8 million, with a debt-to-capitalization ratio of 47.3%.

Guidance

Management reiterated its 2013 earnings per share guidance range of $2.05–$2.25.

Zacks Rank

FTI currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at Natural Gas Services Group Inc. (NGS) and USA Compression Partners L.P. (USAC) as good buying opportunities. These oilfield machineries and equipment suppliers – sporting a Zacks Rank #2 (Buy) – have solid secular growth stories with potential to rise from current levels.
 

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