Cameron OKs $500M in Buybacks - Analyst Blog


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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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.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BP , CAM , DPS , PCS

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