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TechnipFMC (FTI) Q3 Earnings and Revenues Miss Estimates

Zacks Equity Research

TechnipFMC plc. FTI suffered disappointing results in the third quarter of 2019, missing on both earnings and sales.

The oilfield services provider reported adjusted earnings of 12 cents a share, lagging the Zacks Consensus Estimate of 49 cents by a wide margin. The bottom line was also lower than the year-ago earnings of 31 cents a share.

This underperformance was attributed to weaker-than-expected contribution from two of the company’s three segments. Precisely, adjusted EBITDA from the Subsea unit totalled $139 million, significantly falling short of the Zacks Consensus Estimate of $180 million. Moreover, adjusted

EBITDA from Surface Technologies came in at $44.4 million, missing the Zacks Consensus Estimate of $58 million.

However, providing some respite to investors amid this gloom, adjusted EBITDA from the Onshore/Offshore unit was $304 million, beating the Zacks Consensus Estimate of $274 million.

Meanwhile, third-quarter revenues came in at $3,335.1 million, lower than the Zacks Consensus Estimate of $3,561 million but 6% higher than the prior-year figure of $3,143.8 million.

Moreover, on a further discouraging note, the company booked record inbound orders of $2.6 billion, down 28.4% year over year. However, the firm’s backlog soared 59% year over year to $24.1 billion.

Segmental Analysis

Subsea: The segment’s revenues in the quarter under review were $1,342.2 million, up 11% from the year-ago figure of $1,209.1 million. With the subsea sector regaining momentum, the company benefited from the spurt in activities and the achievement of key milestones on projects nearing completion. However, owing to competitively priced backlog and relatively higher share of projects in early phases, TechnipFMC’s operating earnings dropped 43% from the prior-year period to $45.5 million in the quarter under review.

Even though the segment’s inbound orders in the reported quarter slightly dipped 2.8%, its backlog is boosted by $8.6 million, reflecting a 36.5% surge from the year-ago period.

Onshore/Offshore: This segment generated revenues of $1,596 million, increasing 4.2% from the prior-year quarter. Revenues were driven by ramped-up activities on the back of recent awards in downstream, petrochemical and offshore sectors, partly offset by completion of some key projects, especially Yamal LNG. Operating profit from the segment totalled $284.6 million, rising 16.9% from the third-quarter 2018 level, backed by a strong project execution and milestone bonuses on key projects.

The segment’s backlog jumped 79.4% year over year to $15.03 million in the quarter, primarily driven by the plum $7.6-billion contract win for the Arctic LNG 2 project.

Surface Technologies: The company’s smallest segment Surface Technologies recorded revenues of $396.6 million, down 1.4% year over year, primarily due to reduced sales in North America, mainly induced by a drop-in drilling and completion activities.

The segment experienced a downfall in its backlog by 5.9% from the year-ago level to $428.7 million. Owing to the short-cycle nature of the business, orders are generally converted into revenues within a year’s time.

TechnipFMC plc Price, Consensus and EPS Surprise

TechnipFMC plc Price, Consensus and EPS Surprise

TechnipFMC plc price-consensus-eps-surprise-chart | TechnipFMC plc Quote

Dividend, Capex and Financials

In the reported quarter, TechnipFMC spent $98 million on capital programs whereas cash flow from operating activities totalled $92 million. As of Sep 30, the company had cash and cash equivalents of $4,504.4 million and a long-term debt of $3,608.8 million with a debt-to-capitalization ratio of 26.06%.

Revised 2019 Guidance

TechnipFMC has kept revenues and EBITDA margin forecasts for the Subsea and Onshore/Offshore segment intact. Meanwhile, it has tweaked projections for Onshore/Offshore and Subsea segments.

The company expects revenues from the Subsea and Onshore/Offshore units within $5.6-$5.8 billion and $6-$6.3 billion, respectively.

While sales forecasts for the Surface Technologies segment remain unaltered at $1.6-$1.7 billion, its EBITDA margin is tweaked to 10%.

Final Thoughts

With a massive flow of robust backlog in the Onshore/Offshore and Subsea segments, TechnipFMC is at an advantage. These further increases investors’ optimism on the Zacks Rank #3 (Hold) stock. While the company has been snapping up several contracts and benefiting from a strong project execution, reduced dayrates and stiff competition remain headwinds.

Zacks Rank & Key Picks

TechnipFMC carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Sunooco LP SUN, Equinor ASA EQNR and TC Energy Corporation TRP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sunoco’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

Equinor’s earnings beat the Zacks Consensus Estimate in two of the preceding four quarters.

TC Energy earnings beat the Zacks Consensus Estimate in each of the last four quarters.

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