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Oil drilling equipment maker Cameron International Corp. (CAM - Analyst Report) reported fourth quarter earnings per share (excluding charges associated with the Deepwater Horizon incident) of 77 cents, exceeding the 69 cents (adjusted) earned in the prior-year quarter and in line with the Zacks Consensus Estimate. The year-over-year outperformance reflects robust profitability from its ‘Drilling & Production Systems’ and ‘Valves & Measurement’ segments.

Quarterly revenue, at $2,030.7 million, was up 12.3% year over year and also came above the Zacks Consensus Estimate of $1,878.0 million.

For the fiscal year ended December 31, 2011, Cameron reported earnings (excluding non-operating items) of $2.67 per share, a penny ahead of the Zacks Consensus Estimate and up from $2.42 per share (adjusted) in 2010. Revenues of $6,959.0 million were 13.4% above the year ago period and also managed to beat the Zacks Consensus Estimate of $6,821.0 million.

Segment Analysis

Drilling & Production Systems (DPS - Analyst Report): Revenues for the DPS segment totaled $1,216.0 million in the fourth quarter, up 8.8% from the year-ago quarter, while the DPS segment EBITDA rose 8.4% year over year to $246.0 million. The improved performance came on the back of higher level of subsea activity, where it competes with FMC Technologies Inc. (FTI - Analyst Report).

Valves & Measurement (V&M): Quarterly revenues in the V&M segment totaled $462.2 million, up 37.5% year over year. The segment EBITDA increased 51.3% year over year to $92.3 million. The positive comparisons were driven by strong North American business activity levels.

Process & Compression Systems (PCS): Revenues in the PCS segment almost remained flat year over year at $352.5 million. However, the segment EBITDA witnessed a year-over-year fall of 17.2% to $38.0 million.

Backlog

During the quarter, Cameron received orders totaling $1,914.8 million, up 11.9% year over year, mainly reflecting increases across the V&M and PCS segments. The composition of current order booking is 49% for DPS, 28% for V&M and 23% for PCS.

As of December 31, 2011, total backlog stood at $5,969.1 million, up from the year-earlier level of $4,817.1 million, driven by higher backlog across all segments.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditure amounted to $159.6 million, while the full-year outlay came to $388.1 million. As of December 31, 2011, cash and cash equivalents stood at $898.9 million, while total long-term debt (including the current portion) was $1,584.8 million (with debt-to-capitalization ratio of 25.2%).

Guidance

Management gave its EPS guidance range for fiscal 2012 at $3.20–$3.30, while the first quarter profitability is likely to be in the range of 50–55 cents.

Our Recommendation

Cameron currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. Longer-term, we are maintaining our Neutral recommendation on the stock.

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