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Offshore oilfield equipment manufacturer, FMC Technologies (FTI - Analyst Report) reported fourth-quarter adjusted diluted earnings per share of 57 cents, in line with the Zacks Consensus Estimate of 57 cents and better than the year-ago period profit of 41 cents. The results were aided by Surface Technologies’ international surface wellhead business and strong performance in the international market.

Revenues at $1,840.9 million were up 22.7% year over year and also above the Zacks Consensus Estimate of $1,720.0 million.

Segmental Analysis

Subsea Technologies: The segment revenue for the most recent quarter was $1,235.5 million, up 28.2% from the fourth quarter of 2011 buoyed by a rise in the sales of subsea systems.

Operating profit came in at $151.2 million, up 116.6% year over year. The positive comparison reflects higher volumes and an improved performance.

Surface Technologies: Segment revenues were up 18.7% year over year at $443.7 million. The main reasons for the improved performance are volume growth in the surface wellhead business and revenues from the acquisition of Pure Energy Services Ltd. – the leading provider of frac flowback services.

But segment operating profit of $64.6 million decreased 15.4% from the year-ago period, hamstrung by condensed fluid control and surface wellhead activity in North America.

Energy Infrastructure: The segment revenue for the October-December period was $166.6 million, 10.3% above the fourth-quarter 2011 level.

Operating profit increased to $22.8 million from $20.2 million earned in the year-ago quarter, owing to better project execution.

Backlog

As of Dec 31, 2012, FMC’s total backlog (including intercompany eliminations) was $5,377.8 million compared with $4,876.4 million a year ago. Of this, backlog for Subsea Technologies was $4,580.1 million, while Surface Technologies and Energy Infrastructure backlog finished the quarter at $500.8 million and $298.0 million, respectively.

Balance Sheet

During the quarter, FMC spent $122.9 million on capital programs. As of Dec 31, 2012, the company had cash and cash equivalents of $342.1 million and debt of $1,640.8 million, with a debt-to-capitalization ratio of 47.2%.

Guidance

Management estimated its 2013 earnings per share in the range of $2.05–$2.25, on the back of rising Subsea Technologies revenue and margins and continuous solid performance in international surface wellhead.

Zacks Rating

FMC Technologies operates manufacturing facilities in 15 countries outside the U.S., and approximately three-fourths of its sales are generated internationally. The company’s operating areas include economically and politically volatile regions such as North Africa, West Africa, the Middle East, Latin America and Asia Pacific. Instability and unforeseen changes in these markets may have an adverse impact on its operations and earnings.

Additionally, oilfield service stocks are extremely volatile and the correlation of their movement with underlying business fundamentals is sometimes difficult to establish. As such, the shares of FMC Technologies may not be suitable for investors who are not comfortable with day-to-day volatility.

The company currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

However, some other companies in the energy sector are expected to perform well in the coming one to three months. These include Cenovus Energy Inc (CVE - Snapshot Report) with a Zacks Rank #1 (Strong Buy) as well as McDermott International (MDR - Analyst Report) and Technip Ads (TKPPY) with a Zacks Rank #2 (Buy).

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