On Mar 25, 2014, we issued an updated research report on
). The company posted fourth-quarter 2013 adjusted earnings of
$1.15 per share beating the Zacks Consensus Estimate of $1.13.
The quarterly earnings also increased from the year-ago profit
level of 76 cents. The outperformance was mainly backed by growth
in product and service revenues as well as increased demand for
offshore equipment. The company registered total revenue of
$232.5 million, up 23.3% from the year-ago level of $188.5
The offshore drilling equipment maker - Dril-Quip - is likely to
benefit from increased deepwater activity over the near term,
recent capacity additions in Brazil and Singapore, as well as
ongoing capacity expansion, over the coming years.
As of Dec 31, 2013, the company had a backlog of $1.2 billion
compared with $881 million as of Dec 31, 2012. The company also
enjoys a favorable position given its solid backlog, including a
debt-free balance sheet. In 2014, we expect large orders from the
Gulf of Mexico (GoM) and Brazil, with rising demand and higher
activity level in these regions. This gives it the financial
flexibility to take advantage of new growth opportunities while
returning capital to shareholders.
For the first quarter of 2014, the offshore drilling equipment
maker expects earnings between $1.10 and $1.20 per diluted share,
excluding any unusual or special charges. Additionally, based on
current market conditions, Dril-Quip expects full-year adjusted
earnings per share at $5.00-$5.20.
However, in the subsea capital equipment area, Dril-Quip's
competitive position is fairly weak in the more lucrative, large
and complex deepwater segment. Despite its strenuous efforts over
the last couple of years, it has made little headway in gaining
market share from larger competitors.
Additionally, delay in deepwater infrastructure awards may also
hinder the growth prospect of the company.
Key Picks from the Sector
Dril-Quip currently retains a 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.
Meanwhile, one can consider better-ranked players in the energy
Valero Energy Corporation
Range Resources Corporation
Helmerich & Payne, Inc.
). All the stocks sport a Zacks Rank #1 (Strong Buy).
DRIL-QUIP INC (DRQ): Free Stock Analysis
HELMERICH&PAYNE (HP): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
VALERO ENERGY (VLO): Free Stock Analysis
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