FMC Technologies (FTI) Q3 Earnings Top Despite Oil Slump

Oil drilling equipment maker FMC Technologies Inc. (NYSE:FTI) reported third-quarter adjusted earnings per share of 35 cents, ahead of the Zacks Consensus Estimate of 23 cents. The results were driven by cost reduction efforts.

However, a steep contraction in project activity in the wake of plunging oil prices meant that the company’s bottom line fell sharply from the year-ago level of 61 cents.

Revenues at $1,091.2 million were down 29% year over year and also came below the Zacks Consensus Estimate of $1,157.0 million.

Segmental Analysis

Subsea Technologies: FMC Technologies – which is currently in the process of combining with Paris-based offshore oil and gas field developer Technip (PA:TECF) SA (OTC:TKPPY) – is particularly well positioned in the subsea technologies market, where it competes with a larger rival Schlumberger Ltd.’s (NYSE:SLB) Cameron group.

The segment revenue for the most recent quarter was $798.4 million, reflecting a decrease of 27% from the third quarter of 2015 as reduced capital spending by energy players resulted in lower inbound orders and backlog.

Operating profit came in at $119.7 million, down 30% year over year. The negative comparison reflects tough market conditions.

Surface Technologies: Segment revenues were down 40% year over year to $218.1 million. The main reason for the deteriorating performance can be attributed to sharply lower North American activity on slipping rig count.

As a result, the unit reported an operating loss of $21.7 million. However, savings from significant restructuring actions meant that the loss narrowed from the year-ago period.

Energy Infrastructure: The segment revenue for the July to September period was $77.1 million, 21% below the third-quarter 2015 figure of $97.1 million on lower activity.

However, cost actions helped the company to eke out a small profit of $2.5 million from the division against a loss of $2 million a year ago.

Backlog

As of Sep 30, 2016, FMC Technologies’ total backlog (including intercompany eliminations) was $3,022.9 million compared with $4,952.6 million a year ago. Of this, backlog for Subsea Technologies was $2,534.0 million, while Surface Technologies and Energy Infrastructure backlog finished the quarter at $379.3 million and $112.4 million, respectively.

Balance Sheet

In the reported quarter, FMC Technologies spent $26.1 million on capital programs. As of Sep 30, the company had cash and cash equivalents of $1,074.2 million and long-term debt of $1,245.1 million, with a debt-to-capitalization ratio of 31.7%.

Zacks Rank

FMC Technologies carries a Zacks Rank #3 (Hold). In case you are looking for energy names for your portfolio, one could opt for CONE Midstream Partners L.P. (NYSE:CNNX) . It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Canonsburg, PA, CONE Midstream Partners is a master limited partnership focused on natural gas and condensate gathering in the Marcellus Shale in Pennsylvania, Ohio and West Virginia. It surpassed estimates in each of the last four quarters at an average rate of 19.38%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>