) has reported second-quarter 2012 earnings of 74 cents per share,
comfortably beating the Zacks Consensus Estimate by 3 cents and
increasing more than 34% from the year-ago profit level of 55
cents. The increase was mainly backed by growth in product and
service revenues as demand for offshore equipment climbs.
The company registered total revenue of $176.6 million in the
quarter, up 28.9% from the year-ago level of $137.0 million. The
reported figure also surpassed the Zacks Consensus Estimate of
Operating income expanded 35.9% to $41.3 million from the
year-earlier level of $30.4 million. On the cost front, on an
annualized basis, selling, general and administrative expenses rose
8.6% to $17.4 million from the year-earlier level of $16.0 million,
while its engineering and product development costs rose 11.1%.
Notably, depreciation and amortization expenses increased 31.4% to
As of June 30, 2012, the company had a backlog of $697 million,
compared with $727 million in the prior-year quarter.
Capital expenditures in the quarter were $13.9 million, compared
with $13.0 million in the year-earlier quarter.
For the third quarter of 2012, the offshore drilling equipment
maker − Dril-Quip − expects earnings between 65 cents and 75 cents
per diluted share, excluding any unusual or special charges.
Additionally, based on the current improved market conditions,
Dril-Quip increased its full-year adjusted earnings per share
expectation to $2.75-$2.95 from the prior expectation of
We are maintaining our long-term Neutral recommendation on
Dril-Quip, supported by a Zacks #3 Rank (short-term Hold rating) -
reflecting its exposure to the highly volatile oil and gas sector
The company reported impressive second quarter results fueled by
growth in demand for offshore equipments. Increased deepwater
activity, recent capacity additions in Brazil and Singapore, as
well as ongoing capacity expansions are expected to prove
beneficial over time.
The planned investment of Brazil's state-run energy giant
Petroleo Brasileiro S.A.
) in the country's offshore market over the next five years will
also likely prove beneficial for Dril-Quip, which is well
positioned to take advantage of the project. Hence, beyond 2012,
the company remains well suited for Petrobras' planned newbuilds
and continued, general secular growth. Petrobras has also increased
its contract term to 4 years from 3 and Dril-Quip is likely to
benefit from the potential renewal of its expiring 3-year, $180
million subsea wellhead contract with the former.
We remain concerned about company-specific risks, which include new
product growth challenges, manufacturing difficulties and potential
backlog losses. Additionally, delays in deepwater infrastructure
contracts may also hinder the growth prospect of Dril-Quip.
DRIL-QUIP INC (DRQ): Free Stock Analysis Report
PETROBRAS-ADR C (PBR): Free Stock Analysis
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