CAM Cameron International Corp.

Oil drilling equipment maker FMC Technologies Inc. (FTI) reported fourth quarter diluted earnings per share of 41 cents, well below the Zacks Consensus Estimate of 51 cents. The weaker-than-expected results were mainly due to lower subsea margins owing to higher project costs and expenses.

However, compared with the year-ago period, FMC’s earnings per share improved by a handsome 20.6% (from 34 cents to 41 cents) on the back of strength in surface systems orders. The fourth quarter 2010 results have been adjusted for one-time items.

Revenues at $1,500.5 million were up 36.1% year over year and were also above the Zacks Consensus Estimate of $1,432.0 million.

For its fiscal year ended December 31, 2011, FMC reported profit of $1.64 per share on revenues of $5,099.0 million.

Segmental Analysis

Subsea Technologies: FMC is particularly well positioned in the subsea technologies market, where it competes with larger rival Cameron International Corp. (CAM). The segment revenue for the most recent quarter was $963.9 million, an increase of 38.2% from the fourth quarter of 2010, buoyed by a rise in sales of subsea systems.

Operating profit came in at $69.8 million, down 18.7% year over year. The negative comparison reflects charges associated with project delays, as well as costs and inefficiencies related to the expansion of headcount to support growth.  

Surface Technologies: Segment revenues were up 37.8% year-over-year to $373.7 million. The main reasons for the improved performance can be attributed to the sales ramp-ups in the fluid control and surface wellhead businesses, both of which had record quarters.

Segment operating profit, at $76.4 million, increased 61.2% from the year-ago period, driven by higher volume in fluid control and surface wellhead on the back of strong North American shale activity.

Energy Infrastructure: The segment revenue for the October-December period was $151.1 million, 21.0% above the fourth quarter 2010 level. This reflects measurement solutions' record sales in the quarter.

Operating profit came in at $20.2 million, compared with $15.8 million earned a year ago, pumped up by higher volume in measurement solutions.

Backlog

As of December 31, 2011, FMC’s total backlog (after accounting for intercompany eliminations) was $4,876.4 million, compared to $4,171.5 million at December 31, 2010. Of this, backlog for Subsea Technologies was $4,090.0 million, while Surface Technologies and Energy Infrastructure backlog finished the quarter at $577.7 million and $226.9 million, respectively.

Balance Sheet

During the quarter, FMC spent $87.0 million on capital programs, while the full-year outlay came to $274.0 million. As of December 31, 2011, the company had cash and cash equivalents of $344.0 million and debt of $623.6 million, with a debt-to-capitalization ratio of 30.5%.

Guidance

Management guided towards 2012 earnings per share in the $2.10 – $2.25 range.

Rating & Recommendation

FMC shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

 
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