However, it's too early to call it overpaying, as the stock price -- like that of many companies in the oil and gas industry -- has fallen sharply with oil prices over the past several months. The company has another $665 million approved to spend on share buybacks, and it's likely that it will spend it quickly if the share price remains depressed.
Strong results in DPS unit
Cameron's Drilling & Production Systems business group continues to perform well, with revenues in this segment up 21% last quarter to $1.98 billion. This was driven by two key parts: The Surface business grew orders 35% in the quarter, while OneSubsea -- Cameron's joint venture with oilfield services expert Schlumberger Limited -- had its best quarter in terms of booked business this year.
The worst case is OPEC choosing to keep overproducing in an effort to force U.S. shale producers to reduce domestic output. This would require significant overproduction for an extended period, and frankly, there's a lot of evidence that OPEC producers like Iran, Syria, and Venezuela can't afford to suppress oil prices for an extended period themselves, largely due to the massive social programs that oil revenues pay for.
Looking forward: Buy, sell, or hold?
The good thing about Cameron International is that it's a great business to start with, and one that is very integrated into the oil and gas industry. And while it does carry $3.3 billion in debt, it has $1.5 billion in cash, a strong cushion against a prolonged slowdown in production that could hinder its business results.
For long-term investors with a time horizon that's more than three years, today's price is probably a relative bargain. Eventually, Europe will make it through its prolonged economic woes, and demand for oil will start to grow a little more. Furthermore, with many OPEC producers having massive social commitments at home, oil prices are more likely than not to rebound, if slowly.
All combined, it's hard to see a valid reason to sell right now, at least based on the business performance and prospects over the long term. However, I'd probably start small and build out a position over the next year as the oil price and demand picture becomes clearer.
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The article Despite Falling Oil Prices, Cameron International Corporation Reports Strong Quarter originally appeared on Fool.com.
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