Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Dec 6, 2013, we retained our Neutral recommendation on oil drilling equipment maker FMC Technologies Inc. (FTI - Analyst Report). Our investment thesis is supported by a Zacks Rank #3 (Hold).

Why the Reiteration?

The company has a diversified product portfolio, specialty service capabilities and proprietary technological expertise. Other positives for FMC Technologies include a strong backlog position, growing international operations and a favorable outlook for subsea activity levels. However, we think the current valuation is fair and adequately reflects the company’s future growth prospects.  

Detailed Analysis

FMC Technologies is particularly well positioned in the subsea systems market. It is the company’s largest and fastest-growing business, accounting for about two-thirds of revenue. Subsea products have seen an increase in interest, and we expect earnings in this segment to strengthen – especially due to FMC Technologies’ leadership position in subsea production systems, including subsea trees, controls and manifold and tie-in systems.

Order flow and backlog for subsea products and services will continue to be healthy and trend higher. FMC Technologies remains poised to receive a large share of big contracts moving forward. We are further encouraged by the company’s recent subsea equipment deals with industry giants like Brazil's state-run energy powerhouse Petroleo Brasileiro S.A., or Petrobras (PBR - Analyst Report) and Europe’s largest oil company Royal Dutch Shell plc (RDS.A - Analyst Report).

FMC Technologies’ strong backlog, which now stands at more than $7 billion, not only reflects steady demand from its customers but also offers long-term earnings and cash flow visibility. This enables the company to navigate uncertainty better than many of its peers.

However, we have a difficult time justifying a sufficient enough potential return to support an Outperform rating. Moreover, with markets remaining competitive and pricing likely to be weak, we believe FTI shares are fairly valued and expect them to perform in line with the broader market.

Stocks That Warrant a Look

While we expect FMC Technologies to perform in line with its peers and industry levels in the coming months and advice investors to wait for a better entry point before accumulating shares, one can look at SM Energy Co. (SM - Analyst Report) as a good buying opportunity. The U.S. upstream energy operator – sporting a Zacks Rank #1 (Strong Buy) – has solid secular growth stories with the potential to rise significantly from the current levels.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%
INTERNATIONA ICAGY 33.30 +5.38%