Higher Orders Buoy Cameron 3Q

Zacks

Oil drilling equipment maker Cameron International Corp. (CAM) reported strong third quarter results, driven by higher orders across the firm’s products and markets.

The Houston, Texas-based company came out with earnings per share – excluding charges associated with integration costs – of 91 cents, beating the Zacks Consensus Estimate by 3 cents. Cameron’s performance also improved from the year-ago adjusted profit of 78 cents.

Quarterly revenue, at a record $2,218.3 million, was up 31.6% year over year and was also above the Zacks Consensus Estimate of $2,196.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,279.7 million in the third quarter, an increase of 31.0% from the year-ago period, while the DPS segment EBITDA rose 7.5% year over year to $239.9 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 $536.0 million, up 23.4% year over year. The segment EBITDA increased 26.9% year over year to $116.0 million. The positive comparisons were driven by strong infrastructure activity levels throughout the world.

Process & Compression Systems (PCS): Revenues in the PCS segment jumped 46.8% year over year to $402.6 million. The segment EBITDA witnessed a year-over-year improvement of 49.7% to $50.6 million, driven by operational efficiencies.

Backlog

During the quarter, Cameron received orders totaling $2,300.1 million, up 14.8% year over year, reflecting an increase in the DPS segment. The composition of current order booking is 64% for DPS, 21% for V&M and 15% for PCS.

As of September 30, 2012, total backlog stood at a record $7,597.7 million, up from the year-earlier level of $5,787.5 million, driven by sharply higher backlog in the DPS segment.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditures amounted to $98.7 million. As of September 30, 2012, cash and cash equivalents stood at $990.7 million, while total long-term debt was $2,017.8 million (with debt-to-capitalization ratio of 27.5%).

Guidance

Management expects fourth quarter profitability to be in the range of 95–97 cents per share.

Rating & Recommendation

Cameron currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.

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