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Oil drilling equipment maker Cameron International Corp. (CAM - Analyst Report) reported third quarter earnings per share (excluding special items) of 78 cents, exceeding the 64 cents (adjusted) earned in the prior-year quarter and the Zacks Consensus Estimate of 74 cents. The outperformance reflects robust profitability from its ‘Drilling & Production Systems’ and ‘Valves & Measurement’ segments. 

Quarterly revenue, at $1,685.9 million, was up 10.4% year over year but came below the Zacks Consensus Estimate of $1,795.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $977.2 million in the third quarter, up 3.5% from the year-ago quarter, while the DPS segment EBITDA rose 20.2% year over year to $223.1 million. The improved performance came on the back of higher level of subsea sales.

Valves & Measurement (V&M): Quarterly revenues in the V&M segment totaled $434.4 million, up 38.9% year over year. The segment EBITDA increased 69.3% year over year to $91.4 million. The positive comparisons were driven by strong North American business activity levels.

Process & Compression Systems (PCS): Revenues in the PCS segment increased 1.4% year over year to $274.3 million. However, the segment EBITDA witnessed a year-over-year fall of 40.1% to $33.8 million.

Backlog

During the quarter, Cameron received orders totaling $2,003.1 million, up 35.4% year over year, reflecting increases across the DPS and V&M segments. The composition of current order booking is 57% for DPS, 26% for V&M and 17% for PCS.

As of September 30, 2011, total backlog stood at $5,787.5 million, up from the year-earlier level of $4,935.4 million, driven by higher backlog across all segments.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditure amounted to $94.2 million. As of September 30, 2011, cash and cash equivalents stood at $1,536.5 million, while total long-term debt (including the current portion) was $1,587.2 million (with debt-to-capitalization ratio of 25.6%).

Guidance

Management increased its EPS guidance range for fiscal 2011 to $2.63 – $2.66 from the earlier guidance range of $2.55 – $2.65.

Our recommendation

Cameron, which competes with FMC Technologies Inc. (FTI - Analyst Report) 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.

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