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What's in Store for TechnipFMC (FTI) This Earnings Season?

Zacks Equity Research

TechnipFMC plc FTI is set to release fourth-quarter 2018 results after the closing bell on Feb 20.

 

The oilfield services provider recorded an earnings miss in the last reported quarter on weaker-than-expected contribution from its subsea and surface technologies segment. 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 28.42%.

TechnipFMC plc Price and EPS Surprise

TechnipFMC plc Price and EPS Surprise | TechnipFMC plc Quote

Let’s see which way are top and bottom-line estimates headed this time.

 

The Zacks Consensus Estimate for fourth-quarter earnings stands at 37 cents, having remained stable over the past 30 days. This reflects an increase of about 85% from the year-ago figure of 20 cents. The Zacks Consensus Estimate for revenues is pegged at $3.4 billion compared with $3.7 billion in the prior-year quarter.

 

Let’s see how things are shaping up for this announcement.

 

Factors at Play

 

During fourth-quarter 2018, WTI crude plunged from a multi-year high of $76.40 a barrel in early October to below $45 in late December amid weakening demand, supply glut and concerns of economic slowdown. The declining oil prices are likely to impact the oilfield service provider’s performance. 

 

Offshore drilling, which is way more expensive than drilling on land, is more sensitive to oil prices. The Zacks Consensus Estimate for offshore/onshore segment’s adjusted operating profitfor the to-be-reported quarter is pegged at $186 million, down from the year-ago figure of $257.2 million. Slowdown in activities and delayed well completions in North America amid pipeline crisis are likely to affect the company’s Surface Technologies unit. Operating profit from the segment is pegged at $42.86 million, lower than $53.3 million recorded in the fourth quarter of 2017.

 

Nonetheless, operating profit from the subsea segment is projected at $92 million, reflecting a 36.5% increase from the year-ago income of $67.4 million. Notably, total backlog from the subsea unit is expected at $6.3 billion, higher than $6.2 billion recorded in the prior-year period. 

 

On a further encouraging note, total backlog of the company is estimated at $15 billion, higher than $13 billion recorded in the year-ago quarter. 

 

While increasing backlog and subsea strength bode well for the company, weaker performance from the onshore/offshore and surface technologies unit may mar overall results. 

 

What Does the Zacks Model Unveil?

 

Our proven model does not show that TechnipFMC is likely to beat the Zacks Consensus Estimate in the fourth quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

 

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is pegged at -0.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Zacks Rank: TechnipFMC currently carries a Zacks Rank #3. Though a Zacks Rank of 3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

 

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.

 

Stocks to Consider

 

Here are some firms from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

 

C&J Energy Services, Inc. CJ has an Earnings ESP of +26.26% and a Zacks Rank #3. The company is expected to release fourth-quarter earnings on Feb 21. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Cheniere Energy, Inc. LNG has an Earnings ESP of +84.51% and a Zacks Rank #3. The company is set to release fourth-quarter earnings on Feb 26.

 

Ensco plc ESV has an Earnings ESP of +2.63% and a Zacks Rank #3. The company is expected to release fourth-quarter earnings on Feb 28.

 

Zacks' Top 10 Stocks for 2019 

 

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year? 

 

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%. 

 

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