CAM Cameron International Corp.

Oil drilling equipment maker FMC Technologies Inc. (FTI) reported third quarter diluted earnings per share of 50 cents, ahead of the Zacks Consensus Estimate of 46 cents and the year-ago profit of 33 cents. The better-than-expected results were mainly due to strength in subsea systems orders.

Revenues of $1,287.2 million came in short of our expectations of $1,301.0 million, but comfortably surpassed the third quarter 2010 level of $960.0 million.

Segmental Analysis

Energy Production Systems: The segment revenue for the most recent quarter was $1,012.8 million, an increase of 31.5% from the third quarter of 2010, buoyed by a 33% rise in sales of subsea systems.

Operating profit came in at $114.8 million, up 8.4% year over year. The positive comparison reflects improved sales volume, somewhat negated by lower margins in both subsea systems and surface wellhead.

Energy Processing Systems: Segment revenues were up 48.3% year-over-year to $285.7 million. The main reasons for the improved performance can be attributed to the sales ramp-up in the fluid control business, which had a record quarter. Segment operating profit, at $61.0 million, increased 76.8% from the year-ago period, driven by higher volume in fluid control on the back of strong North American pressure pumping activity.

Backlog

As of September 30, 2011, FMC’s total backlog was $4,608.2 million, compared to $3,653.9 million at September 30, 2010 and $4,969.6 million at the end of the previous quarter. Of this, backlog for Energy Production Systems was $4,148.8 million (including $3,800 million in subsea systems backlog), while Energy Processing Systems' backlog finished the quarter at $459.4 million.

Balance Sheet

During the quarter, FMC spent $84.2 million on capital programs. As of September 30, 2011, the company had cash and cash equivalents of $336.4 million and long-term debt of $522.1 million, with a debt-to-capitalization ratio of 25.7%.

Guidance

Management guided towards 2011 earnings per share in the $1.70 – $1.75 range, higher than the previous estimate of $1.60–$1.70.

Our Recommendation

FMC Technologies, which competes with Cameron International Corp. (CAM) and National-Oilwell Varco (NOV) in the ‘Oilfield Machineries and Equipment’ sector, currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. Longer-term, we are maintaining our Neutral recommendation on the stock.

 
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