Oil drilling equipment maker FMC Technologies Inc. (FTI - Analyst Report) reported first quarter earnings per share from continuing operations (excluding a tax benefit of 3 cents) of 32 cents, lagging the Zacks Consensus Estimate of 37 cents and the year-ago profit of 40 cents. The weaker-than-expected results were mainly due to weak results from its ‘Energy Production Systems’ unit.
Revenue of $1,081.9 million came in short of our expectations of $1,140.0 million but managed to surpass the first quarter 2010 level of $1,050.3 million.
Energy Production Systems
The segment revenue for the most recent quarter was $856.4 million, a decrease of 3.5% from the first quarter of 2010, dragged down by a 6.3% fall in sales of subsea systems. This was partially offset by a 5% improvement in surface wellhead revenue on the back of stronger North American activity.
Operating profit came in at $82.2 million, down 47.8% year over year. The negative comparison reflects lower margins in subsea systems combined with increased costs in surface wellhead.
Energy Processing Systems
Segment revenues were up 35.0% year-over-year to $226.1 million. The main reasons for the improved performance can be attributed to the sales ramp-up in the fluid control business, which had a record quarter. Segment operating profit, at $43.7 million, increased 86.8% from the year-ago period, driven by higher volume in fluid control on the back of strong North American pressure pumping activity.
As of March 31, 2011, FMC’s total backlog was $4,577.9 million, compared to $2,679.8 million at March 31, 2010 and $4,175.7 million at the end of 2010. Of this, backlog for Energy Production Systems was $4,235.8 million (including $3,900 million in subsea systems backlog), while Energy Processing Systems' backlog finished the quarter at $342.1 million.
During the quarter, FMC spent $41.0 million on capital programs. As of March 31, 2011, the company had cash and cash equivalents of $376.8 million and long-term debt of $414.6 million, with a debt-to-capitalization ratio of 22.4%.
Management guided towards 2011 earnings per share in the $1.60 – $1.70 range.
FMC Technologies, which competes with Cameron International Corp. and National-Oilwell Varco (NOV - Analyst Report) in the ‘Oilfield Machineries and Equipment’ sector, currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.