) has reported third-quarter 2012 earnings of 73 cents per share,
missing the Zacks Consensus Estimate by a penny. However, the
quarterly earnings increased almost 26% from the year-ago profit
level of 58 cents. The increase was mainly backed by growth in
product and service revenues as demand for offshore equipment
The company registered total revenue of $190.9 million in the
quarter, up 23.2% from the year-ago level of $155.0 million. The
reported figure surpassed the Zacks Consensus Estimate of $178.0
Operating income expanded 21.9% to $38.7 million from the
year-earlier level of $31.8 million. On the cost front, on an
annualized basis, selling, general and administrative expenses
rose 13.7% to $20.8 million from the year-earlier level of $18.3
million, while its engineering and product development costs rose
12.9%. Notably, depreciation and amortization expenses increased
9.4% to $7.0 million.
As of September 30, 2012, the company had a backlog of $747
million, compared with $730 million in the prior-year quarter.
Capital expenditures in the quarter were $12.9 million, compared
with $12.3 million in the year-earlier quarter.
For the fourth 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 improving market conditions,
Dril-Quip expects its full-year adjusted earnings per share
expectation to range between $2.83-$2.93.
We are maintaining our long-term Neutral recommendation on
Dril-Quip, supported by a Zacks #3 Rank (short-term Hold rating).
The cautious stance reflects the company's exposure to the highly
volatile oil and gas sector fundamentals.
The company reported impressive third quarter results fueled by
growth in demand for offshore equipment.
The planned investment of Brazil's state-run energy giant
Petroleo Brasileiro S.A.
, or Petrobras (
) in the country's offshore market over the next five years will
also likely prove beneficial for Dril-Quip. The company is well
positioned to take advantage of the project. Hence, beyond 2012,
the company is geared towards Petrobras' planned newbuilds and
general secular growth.
We nonetheless 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
PETROBRAS-ADR C (PBR): Free Stock Analysis
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