Cameron OKs $500M in Buybacks - Analyst Blog
December 21 2011 - 8:00AM
Zacks
In a filing with the U.S.
Securities and Exchange Commission, oil drilling equipment maker
Cameron International Corp. (CAM)
announced plans to buy back up to $500 million of its common
stock.
Cameron, which recently agreed to
pay $250 million to British energy giant BP plc
(BP) as a settlement for its role in last
year’s Deepwater Horizon rig disaster, has bolstered its long-term
earnings and cash flow visibility on the back of the company’s
strong backlog, which now stands at nearly $6 billion. We believe
the buyback plan highlights the oilfield equipment supplier’s
commitment to create value for shareholders, while still allowing
the flexibility to continue pursuing growth in its retail and
logistics businesses.
As of now, Cameron has about 245.2
million shares outstanding. A share repurchase at the company would
lead to a lesser number of outstanding shares, escalating its
earnings per share ratio, even if profits remain the same.
Houston, Texas-based Cameron is a
leading manufacturer of pressure control equipment used in onshore,
offshore, and subsea applications for oil and gas drilling,
production, and transmission. The company operates under three main
segments: Drilling & Production Systems (DPS), Valves &
Measurement (V&M) and Process & Compression Systems
(PCS).
Cameron currently retains a Zacks
#3 Rank, which translates into a short-term Hold rating. We are
also maintaining our long-term 'Neutral' recommendation on the
stock.
Cameron is well positioned going
forward given its dominant market share, technology leadership,
efficient execution skills and healthy backlog position. The
increase in North American drilling activity, along with potential
opportunities from the industry complying with new pressure control
equipment rules, has added to this bullish sentiment. Furthermore,
we believe that Cameron is poised to benefit from the improving
subsea activity levels in 2011 and beyond.
However, we believe that Cameron’s
current valuation adequately reflects its growth profile, and would
rather wait for a better entry point before accumulating shares.
Moreover, with markets remaining competitive and pricing likely to
be weak, we don't see any obvious catalyst in Cameron’s business to
significantly push the stock price higher.
BP PLC (BP): Free Stock Analysis Report
CAMERON INTL (CAM): Free Stock Analysis Report
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