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Oil drilling equipment maker FMC Technologies Inc. (FTI - Analyst Report) reported third quarter diluted earnings per share of 49 cents, improving from 41 cents profit recorded a year ago. Both quarters include 4 cents as the 2013 Multi Phase Meters earn-out adjustment. The results were driven by the strength in its subsea business.

However, FTI’s reported earnings failed to beat the Zacks Consensus Estimate of 59 cents.

Revenues of $1,724.5 million were up 21.5% year over year but below the Zacks Consensus Estimate of $1,745.0 million.

Segmental Analysis

Subsea Technologies: FTI is particularly well positioned in the subsea technologies market. The segment revenues for the most recent quarter were $1,119.9 million, up 20.5% from third quarter 2012.

Operating profit came in at $121.1 million, up 9.7% year over year. The positive comparison reflects higher sales and better execution.

Surface Technologies: Segment revenues were up 25.7% year over year at $455.9 million. The main reasons for the improved performance can be attributed to the sales ramp-up in the surface wellhead business, together with contribution from completion services revenues.

Moreover, segment operating profit – at $74.5 million – also increased 29.6% from the year-ago period on the back of higher sales from the surface wellhead business.

Energy Infrastructure: The segment revenue for the Jul-Sep period was $152.4 million, 15.0% above the third quarter 2012 level of $132.4 million.

Operating profit improved to $17.9 million from $12.8 million earned a year ago, aided by better showing in loading systems and measurement solutions.

Backlog

As of Sep 30, 2013, FTI’s total backlog (including intercompany eliminations) was a record $7,365.7 million compared to $5,282.2 million a year ago. Of this, Subsea Technologies was the highest contributor with a record backlog of $6,467.5 million, after winning $1,728.7 million in contracts this quarter. Surface Technologies and Energy Infrastructure backlog finished the quarter at $608.1 million and $299.0 million, respectively.

Balance Sheet

During the quarter, FTI spent $80.8 million on capital programs. As of Sep 30, 2013, FTI had cash and cash equivalents of $360.2 million and long-term debt (including current portion) of $1,575.9 million, with a debt-to-capitalization ratio of 43.1%.

Guidance

Management downsized the 2013 earnings per share guidance, which now stands at $2.00–$2.10 against the previous $2.10–$2.25.

Zacks Rank & Stock Picks

FTI currently carries 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 Stone Energy Corp. (SGY - Analyst Report), Seadrill Partners LLC (SDLP - Snapshot Report) and Gulfmark Offshore, Inc. (GLF - Snapshot Report) as investment opportunities. These energy sector stocks – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with the potential to rise significantly from the current levels.
 

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