Dril-Quip Revenue Fuels Growth - Analyst Blog

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Dril-Quip Inc. ( DRQ ) has reported first-quarter 2012 earnings of 71 cents per share, comfortably beating the Zacks Consensus Estimate of 67 cents and increasing more than 31% from the year-ago profit level of 54 cents.

The company registered total revenue of $177.1 million in the quarter, up 28.7% from the year-ago level of $137.7 million. The increase in revenue was mainly backed by the growth in product and service revenues. The reported figure also surpassed the Zacks Consensus Estimate of $165 million.

Operating income expanded 31% to $40.0 million from the year-earlier level of $30.6 million. The company faced a considerable rise in costs. On an annualized basis, selling, general and administrative expenses rose 12% to $20.4 million from the year-earlier level of $18.3 million, while its engineering and product development costs rose 10.5%.

Backlog

As of March 31, 2012, the company had a backlog of $701 million, compared with $655 million in the prior-year quarter.

Capex

Capital expenditures in the quarter were $13.9 million, compared with $19.8 million in the year-earlier quarter.

Guidance

For the second quarter of 2012, earnings are projected between 62 cents and 72 cents per diluted share, excluding any unusual or special charges. Dril-Quip expects its 2012 earnings to range between $2.60 and $2.80 per share.

Our Take

We are maintaining our long-term Underperform recommendation on Dril-Quip, supported by a Zacks #4 Rank (short-term Sell rating) - reflecting its exposure to the highly volatile oil and gas sector fundamentals.

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 has also exhibited restricted growth in the past few quarters and we remain cautious going forward. Further, competition from Cameron International Corporation ( CAM ) is also a concern.

Partially offsetting these negatives are increased deepwater activity over the near term, recent capacity additions in Brazil and Singapore, as well as ongoing capacity expansions, all of which could prove beneficial over time.


 
CAMERON INTL (CAM): Free Stock Analysis Report
 
DRIL-QUIP INC (DRQ): 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: CAM , DRQ

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