Analyst Actions: Forum Energy Technologies Coverage Initiated With Outperform, TP of $28 at Credit Suisse

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An Exciting New SMID-Cap in Oilfield Equipment: We believe that Forum Energy Technologies ( FET ) is positioned to benefit from several secular opportunities within oilfield equipment that can drive strong revenue and earnings growth over the next several years. We are comfortable with this strong management team's ability to manage the integration of its current product slate, much of which has come from acquisitions made over the last year, as well as to manage expected future acquisitions. Finally, we see an attractive valuation relative to oilfield equipment peers.

Secular Growth Potential, with Expected Resiliency: FET has attractive exposure to growth segments, including (1) subsea construction, (2) drilling equipment (reflecting both fleet replacement and technology upgrades),

(3) hydraulic fracturing as a means to unconventional hydrocarbon extraction, and (4) deepwater completions. In addition, more than half of FET's revenues are derived from sales of consumables (versus capital equipment), which provides greater resiliency and visibility, in our view. FET also frequently competes in oligopolies, which should help sustain profitability.

Attractive Valuation: FET currently trades at 10.5 and 9.8 times our 2012 and 2013 EPS estimates of $2.05 and $2.20, respectively, a 15% discount to an oilfield equipment peer group on 2013E and specifically 6% less than its nearest peer CAM. Our TP of $28 is DCF derived; we model (conservatively, in our view) ~50% revenue and EPS growth by 2016E versus 2012E, with no additional acquisitions. At our TP, FET would trade at 12.7 times our 2013 EPS estimate versus multiples of 15.5 for CAM and 19.2 for FTI.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities

Referenced Stocks: FET

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