Oilfield equipment manufacturer FMC Technologies Inc.FTI is expected to release its third-quarter 2015 results after the close of the trading session on Tuesday, Oct 20.
The company reported mixed earnings numbers in the trailing four quarters. The results surpassed estimates in two quarters but missed the same in the other two. In the last reported quarter, FMC Technologies fell 10 cents short of the Zacks Consensus Estimate. The miss was attributable to prolonged weakness in the North American land market owing to low crude prices.
Let's see how things are shaping up for this announcement.
Factors to Consider
FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry. Also, the company's strong backlog, which now amounts to nearly $5.3 billion, offers long-term earnings and cash flow visibility. This enables the company to navigate through uncertainty better than many of its peers.
The company had earlier mentioned that it anticipates inbound orders of over $3 billion in 2015 for its Subsea Technologies business. Also, it expects to deliver margins of about 15% in 2015 for this business segment.
However, we remain concerned as FMC Technologies belongs to an industry that is witnessing a downtrend as a result of consistently weak crude prices. This may have a negative impact on the company's upcoming earnings. Also, the company's surface technologies business could be at risk as a result of a decline in rig count and lesser number of wells being completed.
Moreover, the majority of brokerage firms have lowered estimates for the third quarter as well as for the full year, which indicates further bearishness ahead. The third-quarter earnings for the company is currently pegged at 59 cents per share, substantially below the 72 cents reported in the year-ago quarter.
Our proven model does not conclusively show that FMC Technologies is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -3.39%. The Most Accurate estimate for FMC Technologies stands at 57 cents, while the Zacks Consensus Estimate is pegged higher at 59 cents.
Zacks Rank: FMC Technologies carries a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP, the company's ESP of -3.39% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the energy sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Exterran Partners LP EXLP has Earnings ESP of +19.23% and a Zacks Rank #1 (Strong Buy). The company is expected to release earnings on Nov 3.
Matrix Service Company MTRX has Earnings ESP of +12.90% and a Zacks Rank #1. The company is likely to release earnings on Nov 4.
Natural Gas Services Group Inc. NGS has Earnings ESP of +21.05% and a Zacks Rank #1. The company is anticipated to release earnings on Nov 5.
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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 Nasdaq, Inc.