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Is a Beat Likely for TechnipFMC (FTI) This Earnings Season?

Zacks Equity Research

TechnipFMC plc FTI is set to release first-quarter 2019 results after the closing bell on Apr 25. The current Zacks Consensus Estimate for the quarter to be reported is a profit of 30 cents on revenues of $3.2 billion.

The oilfield services provider reported fourth-quarter 2018 adjusted loss of 9 cents a share, lagging the Zacks Consensus Estimate of earnings of 37 cents. Weaker contribution from the subsea segment due to high impairment charges led to the underperformance. Coming to earnings surprise history, the company has a dismal record of missing estimates in each of the last four quarters, resulting in average of 45.86%.

However, the trend is expected to reverse in the to-be-reported quarter as our proven model predicts that TechnipFMC is likely to beat on earnings this time around.

Which way are top and bottom-line estimates headed?

The Zacks Consensus Estimate for first-quarter earnings has moved up a penny in a month’s time to 30 cents per share. This indicates an increase of about 7% from the year-ago reported figure of 28 cents. The Zacks Consensus Estimate for revenues is pegged at $3,163 million, suggesting an improvement from $3,125 billion reported in the prior-year quarter.

TechnipFMC plc Price and EPS Surprise

 

TechnipFMC plc Price and EPS Surprise | TechnipFMC plc Quote

Why a Likely Positive Surprise?

Our proprietary model shows that TechnipFMC is likely to beat earnings estimates in the to-be-reported quarter, as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +7.90%. This is because the Most Accurate Estimate for earnings is pegged two cents above the Zacks Consensus Estimate of 30 cents a share. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: TechnipFMC currently holds a Zacks Rank #3. A Zacks Rank #3, when combined with a positive ESP, makes us confident of an earnings beat.

Conversely, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

Following the oil crash toward the end of 2018 that caught everyone off guard, WTI crude popped up to $60.55 a barrel in the March quarter of 2019, witnessing the fastest rate of oil price increase since a decade. Crude prices rebounded 30% in the first quarter, underpinned mainly by OPEC+ supply cuts and U.S. sanctions against Venezuela and Iran, which boded well for oilfield services companies like TechnipFMC. 

Ramped-up upstream operations, attributable to favorable oil price, may result in greater number of contracts in the first quarter. As such, the Zacks Consensus Estimate for TechnipFMC’s total inbound orders is pegged at $4,325 million, implying a rise from the year-ago reported figure of $3,487 million.

Increasing onshore activities amid crude uptick and gradually improving offshore drilling bode well for its upcoming earnings release. Evidently, the Zacks Consensus Estimate for the company’s first-quarter backlog for Onshore/Offshore segment is pegged at $8,563 million, signaling an increase from the prior-year reported figure of $7,492 million. Further, first-quarter revenues for Subsea and Surface Technologies segments are estimated at $1,258 million and $397 million, pointing to growth from the year-ago reported figure of $1,180 million and $372 million, respectively.

While TechnipFMC may feel the pressure from competitively-priced backlog and reduced day rates, the firm will likely tide over the hurdles on the back of increasing upstream activities and inbound orders in the wake of crude recovery in first-quarter 2019.

Other Stocks to Consider

TechnipFMC is not the only energy firm looking up this earnings season. Here are some other companies from the same space, which according to our model also have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Cabot Oil & Gas Corporation COG has an Earnings ESP of +4.43% and a Zacks Rank #1. The firm is expected to release first-quarter earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips COP has an Earnings ESP of +1.55% and a Zacks Rank #2. The company is anticipated to release quarterly earnings on Apr 30.

Encana Corporation ECA has an Earnings ESP of +44.83% and a Zacks Rank #3. The company is anticipated to release first-quarter earnings on Apr 30.

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