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Oil drilling equipment maker FMC Technologies Inc. (FTI - Analyst Report) is set to release its third quarter 2013 results after market closes on Tuesday, Oct 22.

Last quarter, FMC Tech. posted a 2.13% positive surprise, driven by strength in its subsea business. Let’s see how things are shaping up for the third quarter. 

Factors to Consider This Quarter

FMC Tech. is a leading manufacturer and supplier of technology solutions for the energy sector with operations across 16 countries. It is particularly well positioned in the subsea systems market.

In the quarter to be reported, the company clinched several contracts from big names such as Petrobras (PBR - Analyst Report) and Royal Dutch Shell (RDS.A - Analyst Report). These are expected to add value to the company’s portfolio.

However, we remain concerned about increased competition – both on land and at sea, as well as the company’s exposure to oil and gas prices, which are inherently volatile. Moreover, FMC Tech. has a high risk exposure as about three-fourth of its sales come from international markets.  

Earnings Whispers?

Our proven model does not conclusively show that FMC Tech. will beat 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.

Negative Zacks ESP: This is because the Most Accurate estimate stands at 57 cents, while the Zacks Consensus is higher at 59 cents. This results in a difference of -3.39%.

Zacks Rank: FMC Tech’s Zacks Rank #3 (Hold), however, increases the predictive power of ESP. That said we also need to have a positive ESP to be confident of an earnings surprise call.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks unlikely for FMC Tech., here is an energy firm you may want to consider on the basis of our model, which shows that it has the right combination of elements to post an earnings beat this quarter:

Stone Energy Corp.(SGY - Analyst Report), with earnings ESP of +6.76% and a Zacks Rank #1 (Strong Buy).

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