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Oil drilling equipment maker Cameron International Corp. (CAM - Analyst Report) reported weak third quarter earnings, dragged down by lower-than-expected contribution from the ‘Valves & Measurement’ and ‘Process & Compression Systems’ units.

The Houston, TX-based company came out with earnings per share – excluding charges – of 81 cents, lagging the Zacks Consensus Estimate of 83 cents and the year-ago adjusted profit of 91 cents.

Cameron’s quarterly revenue, at $2,495.8 million, was up 12.5% year over year amid robust sales from its ‘Drilling & Production Systems’ segment. However, the figure was below the Zacks Consensus Estimate of $2,593.0 million amid.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,636.8 million in the third quarter, an increase of 27.9% from the year-ago period, while the DPS segment EBITDA rose 14.1% year over year to $273.6 million. The higher profitability could be attributed to strength in its subsea business.

Valves & Measurement (V&M): Quarterly revenues in Cameron's V&M segment totaled $502.5 million, down 6.3% year over year. The segment EBITDA decreased 7.1% year over year to $107.8 million. The negative comparisons can be attributed to slightly tepid infrastructure activity levels throughout the world.

Process & Compression Systems (PCS): Revenues in the PCS segment fell 11.5% year over year to $356.5 million. The segment EBITDA witnessed a year-over-year deterioration of 14.8% to $43.1 million, on the back of operational hiccups.

Backlog

During the quarter, Cameron received orders totaling $3,045.6 million, up 32.4% year over year, reflecting a 49.4% jump in the DPS segment. The composition of current order booking is 73% for DPS, 16% for V&M and 11% for PCS.

As of Sep 30, 2013, Cameron's total backlog stood at a record $11,159.5 million, up significantly from the year-earlier level of $7,597.7 million, driven by sharply higher backlog in the DPS segment.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditures amounted to $123.3 million. As of Sep 30, 2013, cash and cash equivalents stood at $1,257.0 million, while long-term debt was $1,820.5 million (with debt-to-capitalization ratio of 19.4%).

Guidance

Cameron management provided its fourth quarter earnings per share guidance in the 95 cents–$1.00 range.

Zacks Rank & Stock Picks

Cameron – which counts FMC Technologies Inc. (FTI - Analyst Report) as its competitor – 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 look at Matador Resources Co. (MTDR - Snapshot Report) and Stone Energy Corp. (SGY - Analyst Report) as good buying opportunities. These domestic upstream energy operators – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with potential to rise significantly from current levels.

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