Dril-Quip Misses on Earnings, Cuts '14 Outlook - Analyst Blog


Manufacturer of offshore drilling and production equipment, Dril-Quip Inc. ( DRQ ) reported first-quarter 2014 adjusted earnings of $1.04 per share, missing the Zacks Consensus Estimate of $1.21. Quarterly performance was overshadowed by the exclusion of approximately $10 million of revenue related to equipment completed but not accepted for delivery by one of its major customers. Quarterly earnings, however, increased from 98 cents reported a year ago.

The company registered total revenue of $204.1 million in the quarter, up from the year-ago level of $193.2 million. The reported figure was below the Zacks Consensus Estimate of $242.0 million.

Operating income grew nearly 12.2% to $58.6 million from the year-earlier level of $52.2 million. On the cost front, selling, general and administrative expenses rose 53.1% to $23.9 million from the year-earlier level of $15.6 million, while engineering and product development costs increased 19.5%.


As of Mar 31, 2014, the company had a backlog of $1.4 billion compared with approximately $1.0 billion as of Mar 31, 2013.


For the second quarter of 2014, the offshore drilling equipment maker expects earnings between $1.05 and $1.15 per diluted share, excluding any unusual or special charges. Additionally, based on current market conditions, Dril-Quip lowered its full-year adjusted earnings per share projection from $5.00-$5.20 to $4.70-$4.90.


Dril-Quip's results are heavily levered with continued strength in global deepwater drilling markets, especially in South America and the Asia-Pacific region. Given the operators' long-term outlook on these projects, deepwater drilling and other related services will likely remain relatively stable amid the usual fluctuations in commodity prices.

Zacks Rank

Dril-Quip currently holds a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas sector such as Boardwalk Pipeline Partners, LP ( BWP ), Magellan Midstream Partners LP ( MMP ) and Targa Resources Partners LP ( NGLS ) with a Zacks Rank #1 (Strong Buy) are expected to outperform.

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Zacks Investment Research

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 , Earnings , Stocks

Referenced Stocks: BWP , DRQ , MMP , NGLS



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