FMC Technologies Looking Good - Analyst Blog
December 29 2011 - 7:00AM
Zacks
Incorporated in 2000, Houston,
Texas-based FMC Technologies Inc.
(FTI) is a leading manufacturer and
supplier of technology solutions for the energy industry. The
company, which operates 25 manufacturing facilities in 15
countries, is engaged in the designing, producing and servicing
technologically sophisticated systems and products such as subsea
production and processing systems, surface wellhead production
systems, high pressure fluid control equipment, measurement
solutions, and marine loading systems for the oil and gas industry.
FMC Technologies divides its business into two segments: Energy
Production Systems and Energy Processing Systems.
Capitalizing on the
Secular Trend
The growth in global energy demand
will continue to boost drilling activity, with the employment of
technology to find and recover oil/gas resources. As such,
opportunities for a global large-cap oilfield services company like
FMC Technologies will also improve, as it captures the economic
benefit of this trend. Supported by consistency in its
earnings/cash flows, attractive fundamentals and a positive
outlook, we remain optimistic on the firm’s near-term prospects.
FMC Technologies currently retains a Zacks #2 Rank, which
translates into a short-term Buy rating.
The
Catalysts
FMC Technologies is particularly
well positioned in the subsea systems market, where it competes
with Cameron International Corp.
(CAM). Subsea activity represents the
company’s largest and fastest-growing business, accounting for
about 70% of revenue. Subsea products have seen an increase in
interest, and we expect earnings in this segment to strengthen –
especially due to FMC Technologies’ leadership position in subsea
production systems, including subsea trees, controls and manifold
and tie-in systems.
Following the Gulf of Mexico oil
spill, we expect the company to benefit from the near-term
requirements for better offshore safety equipments. Stricter
regulations on drilling could translate into enhanced opportunities
for subsea equipment suppliers like FMC Technologies.
With a major portion of its total
revenue coming from outside the U.S., FMC Technologies’
international operations are expected to be a key growth driver
going forward and will play an offsetting role to the relatively
soft domestic drilling scene. We have identified Latin America,
Asia Pacific and the Middle East as the key markets in this
regard.
FMC Technologies’ strong backlog,
which now stands at over $4.6 billion, not only reflects steady
demand from its customers but also offers long-term earnings and
cash flow visibility. This enables the company to navigate
uncertainty better than many of its peers.
Recently, FMC Technologies added 15
million shares to its stock repurchase program, joining many others
that are returning cash to shareholders. We believe the enhanced
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.
To
Conclude
All in all, we believe FMC
Technologies is favorably positioned to continue accelerating
revenue/earnings growth over the next few quarters and could be
used as a short-term investment.
CAMERON INTL (CAM): Free Stock Analysis Report
FMC TECH INC (FTI): Free Stock Analysis Report
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