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Factors Setting the Tone for TechnipFMC (FTI) in Q3 Earnings

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TechnipFMC plc (FTI - Free Report) is set to release third-quarter 2020 results on Wednesday Oct 21, after the closing bell.

The Zacks Consensus Estimate for the to-be-reported quarter’s profit is 19 cents per share and for revenues is $3.30 billion.

Let’s delve into the factors that might have impacted the company’s September-quarter performance.

Factors to Consider for Q3 Results

TechnipFMC’s consistent cost-management moves make us upbeat. It steadily reins in its capex by curbing its spending levels. For 2020, the company slashed its 2020 capex guidance by 30% to $300 million from its prior projection after taking into account the persistent plunge in the commodity prices. Further, this is likely to have boosted the company’s earnings in the third quarter, enabling it to generate higher cash flows in the period.

Additionally, the Technip Energies unit is expected to have gained traction from TechnipFMC’s business of process technology as well as robust activity in the LNG downstream business. Evidently, the consensus mark for third-quarter revenues from this segment stands at $1.65 billion, suggesting an increase from $1.60 billion reported in the year-ago quarter.

However, weakness in the North American activity due to the coronavirus pandemic, which dwindled the crude price is expected to have affected the Surface segment’s top line. The Zacks Consensus Estimate for the segment implies a 41.8% plunge to $231 million from the prior-year reported figure.

What Does Our Model Say?

Our proven Zacks model predicts an earnings beat for TechnipFMC this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: TechnipFMC has an Earnings ESP of +20.00%.

Zacks Rank: TechnipFMC currently has a Zacks Rank #3, which increases the predictive power of ESP.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q2 Earnings & Surprise History

TechnipFMCplc’s second-quarter 2020 adjusted earnings of 9 cents per share beat the Zacks Consensus Estimate of 6 cents, attributable to better-than-expected profits from the Technip Energies (previously Onshore/Offshore) segment, which is the major contributor to the company’s bottom line. Also, adjusted EBITDA of $163 million from the same segment outperformed the Zacks Consensus Estimate of $156 million.

However, the bottom line tumbled 76.9% from the year-earlier quarter's adjusted earnings of 39 cents. This underperformance was primarily caused by the coronavirus-induced vulnerable market scenario and lower-than-anticipated profits from the Surface Technologies segment. Precisely, adjusted EBITDA from this unit totaled $8.3 million, lagging the Zacks Consensus Estimate of $11.14 million.

On the flip side, for the quarter ended Jun 30, the company’s revenues of $3.16 billion surpassed the Zacks Consensus Estimate of $3.13 billion owing to strong revenue contributions from the company’s Subsea and Technip Energies unit. However, the top-line but fell 8% from $3.43 billion a year ago.

As far as earnings surprises are concerned, this manufacturer and supplier of products, services and fully-integrated technology solutions for the energy industry is on a slippery ground. Earnings of the company underperformed the Zacks Consensus Estimate in three of the last four quarterly reports and beat the same in the remaining quarter, the average negative surprise being 67.13%. This is depicted in the graph below:

TechnipFMC plc Price and EPS Surprise

TechnipFMC plc Price and EPS Surprise

TechnipFMC plc price-eps-surprise | TechnipFMC plc Quote

Other Stocks to Consider

Some other firms worth considering from the energy space on the basis of our model that shows that these too have the right combination of elements to beat on earnings this season are as follows:

Halliburton Company (HAL - Free Report) has an Earnings ESP of +9.52% and is Zacks #3 Ranked, currently. The firm is scheduled to release earnings on Oct 19.

Core Laboratories N.V. (CLB - Free Report) has an Earnings ESP of +7.87% and a Zacks Rank of 3, currently. The company is scheduled to release earnings on Oct 21.

Parsley Energy, Inc. (PE - Free Report) has an Earnings ESP of +55.55% and is a #3 Ranked player, currently. The firm is scheduled to release earnings on Oct 28.

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