Dril-Quip Beats Consensus - Analyst Blog
February 29 2012 - 8:15AM
Zacks
Dril-Quip Inc. (DRQ) has reported adjusted
fourth-quarter 2011 earnings of 79 cents per share, beating
comfortably the Zacks Consensus Estimate of 62 cents and increasing
almost 15% from the year-ago profit level of 69 cents.
The company registered total revenue of $171.6 million in the
quarter, up 21.2% from the year-ago level of $141.6 million. The
increase in revenue was mainly backed by the rise in sales of
subsea equipment and growth in service revenues. The reported
figure also surpassed the Zacks Consensus Estimate of $155
million.
For full-year 2011, the company’s adjusted earnings were $2.45 per
share, down from the year-earlier level of $2.82. However, total
revenue improved 6.2% to $601.3 million in 2011 from the year-ago
level of $566.3 million.
Operating income expanded 36% to $36.8 million from the
year-earlier level of $27.01 million. The company also faced a
considerable rise in costs. On an annualized basis, selling,
general and administrative expenses rose 12.4% to $17.9 million
from the year-earlier level of $16.0 million, while its engineering
and product development costs rose 11.6%.
Backlog
As of December 31, 2011, the company had a backlog of $716 million,
compared with $627 million at year-end 2010.
Capex
Capital expenditures in the quarter were $11.1 million, compared
with $26.2 million in the year-earlier quarter.
Guidance
Dril-Quip expects its 2012 earnings to range between $2.60 and
$2.80 per share. For the first quarter of 2012, earnings are
projected between 60 cents and 70 cents per diluted share,
excluding any unusual or special charges.
Our Take
We are maintaining our long-term Neutral recommendation on
Dril-Quip, reflecting its strong market share and robust backlog,
partially offset by the challenging macro environment. The key
positive in the Dril-Quip story is its strong leverage to continued
growth in the global deepwater drilling markets, especially in
South America and the Asia-Pacific region.
However, we remain apprehensive about Dril-Quip’s exposure to the
highly volatile oil and gas sector fundamentals. We also remain
concerned about risks from new product development challenges,
manufacturing difficulties and peer competition. Further,
competition from Cameron International Corporation
(CAM) is also a concern.
The company holds a Zacks #4 Rank (short-term Sell rating).
CAMERON INTL (CAM): Free Stock Analysis Report
DRIL-QUIP INC (DRQ): Free Stock Analysis Report
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