Oil drilling equipment maker, FMC Technologies Inc. (FTI Quick QuoteFTI - Free Report) is set to release third-quarter 2016 results after the closing bell on Wednesday, Oct 19.

In the preceding three-month period, the Houston, TX-based firm delivered a negative earnings surprise of 26.67%. The underperformance stemmed from weakness in the North American land market and a negative impact of the strengthening U.S. dollar. Record low rig counts in North America also contributed to the downside.

Coming to earnings surprise history, the company does not have a good record. FMC Technologies missed estimates in three of the last four quarters.

Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

FMC Technologies enjoys a strong position, particularly in the subsea systems market. It is the company’s largest and fastest growing business, which accounts for about two-thirds of its revenues. Subsea products – especially subsea trees, controls and manifold and tie-in systems – have seen an increase in demand. Given the company’s already robust position in this market, we expect margins in the subsea segment to expand.

FMC TECH INC Price and EPS Surprise

Also, FMC Technologies’ strong backlog of around $3.4 billion reflects not only steady demand from its customers but also long-term earnings and cash flow visibility. This enables the company to navigate uncertainty better than many of its peers.

However, the persistent crude price weakness has compelled top energy companies to resort to spending cuts (particularly on the costly upstream projects) owing to lower profit margins. This, in turn, means less work for equipment suppliers like FMC Technologies and is likely to result in declining income in the to-be-reported quarter.

Moreover, the company has historically used bolt-on acquisitions to plug holes in its product/service portfolio. The company may find it difficult to complete accretive transactions in the future, which in turn, could negatively impact its growth rate.

Earnings Whispers

Our proven model does not conclusively show that FMC Technologies will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate stands and the Zacks Consensus Estimate is pegged at 23 cents.

Zacks Rank: FMC Technologies has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, a 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Although an earnings beat looks uncertain for FMC Technologies, here are some firms that you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

CONE Midstream Partners LP has an Earnings ESP of +2.70% and a Zacks Rank #1. The partnership is expected to release earnings results on Nov 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

CSI Compressco LP has an Earnings ESP of +40.00% and a Zacks Rank #2. The company is anticipated to release earnings on Nov 4.

Antero Midstream Partners LP (AM Quick QuoteAM - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #2. The company is likely to release earnings on Oct 26.

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