FMC Tech Hamstrung by Project Costs - Analyst Blog

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Oil drilling equipment maker FMC Technologies Inc. ( FTI ) reported fourth quarter diluted earnings per share of 41 cents, well below the Zacks Consensus Estimate of 51 cents. The weaker-than-expected results were mainly due to lower subsea margins owing to higher project costs and expenses.

However, compared with the year-ago period, FMC's earnings per share improved by a handsome 20.6% (from 34 cents to 41 cents) on the back of strength in surface systems orders. The fourth quarter 2010 results have been adjusted for one-time items.

Revenues at $1,500.5 million were up 36.1% year over year and were also above the Zacks Consensus Estimate of $1,432.0 million.

For its fiscal year ended December 31, 2011, FMC reported profit of $1.64 per share on revenues of $5,099.0 million.

Segmental Analysis

Subsea Technologies: FMC is particularly well positioned in the subsea technologies market, where it competes with larger rival Cameron International Corp. ( CAM ). The segment revenue for the most recent quarter was $963.9 million, an increase of 38.2% from the fourth quarter of 2010, buoyed by a rise in sales of subsea systems.

Operating profit came in at $69.8 million, down 18.7% year over year. The negative comparison reflects charges associated with project delays, as well as costs and inefficiencies related to the expansion of headcount to support growth.  

Surface Technologies: Segment revenues were up 37.8% year-over-year to $373.7 million. The main reasons for the improved performance can be attributed to the sales ramp-ups in the fluid control and surface wellhead businesses, both of which had record quarters.

Segment operating profit, at $76.4 million, increased 61.2% from the year-ago period, driven by higher volume in fluid control and surface wellhead on the back of strong North American shale activity.

Energy Infrastructure: The segment revenue for the October-December period was $151.1 million, 21.0% above the fourth quarter 2010 level. This reflects measurement solutions' record sales in the quarter.

Operating profit came in at $20.2 million, compared with $15.8 million earned a year ago, pumped up by higher volume in measurement solutions.

Backlog

As of December 31, 2011, FMC's total backlog (after accounting for intercompany eliminations) was $4,876.4 million, compared to $4,171.5 million at December 31, 2010. Of this, backlog for Subsea Technologies was $4,090.0 million, while Surface Technologies and Energy Infrastructure backlog finished the quarter at $577.7 million and $226.9 million, respectively.

Balance Sheet

During the quarter, FMC spent $87.0 million on capital programs, while the full-year outlay came to $274.0 million. As of December 31, 2011, the company had cash and cash equivalents of $344.0 million and debt of $623.6 million, with a debt-to-capitalization ratio of 30.5%.

Guidance

Management guided towards 2012 earnings per share in the $2.10 - $2.25 range.

Rating & Recommendation

FMC shares currently retain 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 INTL ( CAM ): Free Stock Analysis Report
 
FMC TECH INC ( FTI ): 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 , FTI

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