FMC Technologies Inc.
) hit a 52-week high of $56.04 on May 6. In fact, the Houston,
Texas-based oil drilling equipment maker has seen its stock price
climb some 30% since the beginning of the year. This price
appreciation can be attributed to its diversified product
portfolio, proprietary technological expertise, a strong backlog
position and favorable outlook for subsea activity levels.
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Why the Bullishness?
FMC Technologies is particularly well positioned in the subsea
systems market. It is the company's largest and fastest-growing
business, accounting for about two-thirds of revenue. Subsea
products have seen an increase in interest, and we expect
earnings in this segment to strengthen - especially due to FMC
Technologies' leadership position in subsea production systems,
including subsea trees, controls and manifold and tie-in systems.
Order flow and backlog for subsea products and services will
continue to be healthy and trend higher. FMC Technologies remains
poised to receive a large share of big contracts moving forward.
We are further encouraged by the company's recent subsea
equipment deals with industry giants like Brazil's state-run
energy powerhouse Petroleo Brasileiro S.A., or
) and British major
FMC Technologies' strong backlog, which now stands at more than
$5 billion, not only reflects steady demand from its customers
but also offers long-term earnings and cash flow visibility. This
enables the company to navigate uncertainty better than many of
However, we remain worried on valuation grounds. At current
multiples - significantly higher than peers - we have a difficult
time justifying a sufficient enough potential return for
investors. At the same time, markets remain competitive with
pricing likely to be weak in the near future.
This accounts for FMC Technologies' current Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
Stocks to Consider
With FMC Technologies shares trading at all-time highs, any
upside from here may be limited. Meanwhile one can look at
Natural Gas Services Group Inc.
) as an attractive investment. This U.S. energy machineries
provider - sporting a Zacks Rank #2 (Buy) - offer value and is
worth accumulating at current levels.