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TechnipFMC (FTI) Q4 Earnings Miss Estimates, Backlog Jumps

Zacks Equity Research

Seabed-to-surface oilfield equipment and services provider TechnipFMC plc FTI reported fourth-quarter 2019 adjusted EPS of 3 cents, falling well short of the Zacks Consensus Estimate of 43 cents.

The underperformance can be primarily attributed to lower-than-anticipated profits from the Onshore/Offshore segment – the major contributor to the company’s top and bottom line. Precisely, adjusted EBITDA from the unit totaled $259.7 million, lagging the Zacks Consensus Estimate of $296 million.

However, the bottom line turned around from the year-earlier quarter's adjusted loss of 9 cents on strong contribution from the Surface Technologies segment, whose adjusted EBITDA of $55.9 million beat the Zacks Consensus Estimate of $42 million.

Meanwhile, for the quarter ended Dec 31, the company’s revenues of $3.7 billion missed the Zacks Consensus Estimate by 3.8% but increased 12.2% from $3.3 billion a year ago.

In the fourth quarter, TechnipFMC’s inbound orders fell by 7.1% compared to the year-ago period, to $2.7 billion. But there was considerable improvement in inbound order receipts for the full-year 2019, which surged by 58.8% to $22.7 billion – a signal of improving revenue visibility.

The company’s backlog is up too. As of year-end 2019, TechnipFMC’s order backlog stood at $24.3 billion, improving by 66.6% from 2018.

TechnipFMC plc Price, Consensus and EPS Surprise

 

TechnipFMC plc Price, Consensus and EPS Surprise

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

Segment Analysis

Subsea: The segment’s revenues in the quarter under review were $1.5 billion, up 20.6% from the year-ago sales figure of $1.2 billion with project and service activities on the rise. Meanwhile, adjusted EBITDA was reported at $185 million, a 24.6% year-over-year improvement on lower costs and project completions. Quarterly inbound orders jumped 33.1% to $1.2 billion, while backlog rose 36.7%.

Onshore/Offshore: This segment generated revenues of $1.8 billion, increasing 9.6% from the prior-year quarter. Revenues were driven by TechnipFMC’s portfolio of process technologies, as well as robust activity in Europe, Asia and North America. In the fourth quarter of 2019, the company reported that this unit reported $259.7 million in adjusted EBITDA, up from $217.2 million in the prior-year quarter. Management attributed this upswing to strong project execution, particularly in the Yamal LNG project. Inbound orders were down 30.8% to $1.1 billion but the Onshore/Offshore backlog jumped 89.1% year over year to $15.3 billion at the end of the quarter.

Surface Technologies: The company’s smallest segment – Surface Technologies – recorded revenues of $407.6 million, down 2.3% year over year, primarily due to slowdown in North American completions activity. This was partly offset by higher revenues from the international energy markets. Adjusted EBITDA was down 13.9% to $55.9 million on volume and pricing woes in North America. The segment’s inbound orders edged down 0.8%, while year-end backlog inched up 0.7%.

Financials

In the reported quarter, TechnipFMC spent $86 million on capital programs, bringing the full-year total to $454.4 million. Meanwhile, cash flow from operations for the quarter and the year came in at $559.1 million and $849 million, respectively. In 2019, the company paid out $233 million as dividends to shareholders, while buying back $93 million worth its own shares. As of Dec 31, the company had cash and cash equivalents of $5.2 billion and a long-term debt of $4 billion with a debt-to-capitalization ratio of 34.2%.

2020 Guidance

TechnipFMC provided 2020 guidance for its operating segments. The company expects revenues from the Subsea, Onshore/Offshore and Surface units within $6.2-$6.5 billion, $7.5-$7.8 billion and $1.4-$1.6 billion, respectively. Further, TechnipFMC has set minimum EBITDA margins targets of 11%, 10% and 12% for the abovementioned segments. This year, the company expects to shell out $450 million as capital expenditures, while cash flow from operating activities should be more than $1 billion.

Zacks Rank & Stock Picks

TechnipFMC holds a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Chevron CVX, Marathon Oil MRO and Hess Corporation HES that sport a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The 2020 Zacks Consensus Estimate for Chevron indicates 12.4% earnings per share growth from 2019 level.

Marathon Oil has surpassed estimates in three of the last four quarters, the average being 190.8%.

The 2020 Zacks Consensus Estimate for Hess indicates 93.7% earnings per share growth from 2019 level.

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