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Subsea Weakness Causes TechnipFMC (FTI) to Miss Q4 Earnings

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TechnipFMC plc (FTI - Free Report) reported fourth-quarter 2017 earnings on a diluted basis (excluding one-time items) of 20 cents a share, missing the Zacks Consensus Estimate of 44 cents. The weak results can be attributed to lower revenues amid reduced project activities from its subsea segment. The bottom line also deteriorated from the year-ago adjusted earnings of 50 cents a share.

Revenues in the fourth quarter came in at $3,683 million below the Zacks Consensus Estimate of $3,834 million. Further, the revenues in the quarter under review also decreased 15.9% from the prior-year figure of $4,379.7 million.

TechnipFMC plc Price, Consensus and EPS Surprise

TechnipFMC plc Price, Consensus and EPS Surprise | TechnipFMC plc Quote

Segmental Analysis

Subsea: The segment’s revenues for the fourth quarter were $1,292.2 million, reflecting a decrease of 36.2% from the year-ago figure of $2,024.1 million. Reduced project activities in Europe, Africa and Asia pacific regions led to the lower revenues. Concurrently, operating profit came in at $67.4 million, down 53.9% year over year.

Onshore/Offshore: This segment generated revenues of $2,019.5 million, down 2% year over year. Revenues declined due to completion of the first phase of a key LNG project, partly offset by increased activities in the Middle East, Europe and Asia Pacific regions. However, operating income jumped to $257.2 million versus operating loss of $55 million recorded in the fourth quarter of 2016.  Strong project execution, especially successful progression of Yamal LNG project drove the profit of the segment.

Surface Technologies: The segment’s revenues for the fourth quarter were $372.3 million, up 22.6% from fourth-quarter 2016 figure of $303.6 million. The increase is primarily attributed to the rising momentum in the North American as well as completion activity. Further, a favorable product mix and leaner cost structure helped the company to report an operating profit of $53.3 million against an operating loss of $5.3 million incurred a year ago.

Backlog

As of Dec 31, 2017, TechnipFMC’s total backlog was $12,982.8 million compared with $16,743.9 million a year ago. Of this, backlog for Onshore/Offshore was $6,369.1 million, while Subsea and Surface Technologies backlogs were $6,203.9 million and $409.8 million, respectively.

Capex & Balance Sheet

In the reported quarter, TechnipFMC spent $85.3 million on capital programs. As of Dec 31, the company had cash and cash equivalents of $6,737.4 million and long-term debt of $3,777.9 million, with a debt-to-capitalization ratio of 22%.

Dividend

The board of directors declared a quarterly cash dividend of 13 cents per share, payable on Apr 4, 2018 to shareholders of record as of Mar 20, 2018.

Guidance

TechnipFMC projects revenues for Onshore/ Offshore segment to be within the range of $5.3-$5.7 billion in 2018, with an EBITDA margin of 10.5%, up from the prior guidance of 9.5%. Surface Technologies are expected to generate revenues between $1.5-1.6 billion, with EBITDA margin of 17.5%. The company estimates its subsea revenues to lie within $5-$5.3 billion, with EBITDA margin of 14%.  Capex for 2018 is estimated to be around $300 million.

Zacks Rank and Key Picks

Headquartered in London, TechnipFMC is a manufacturer and supplier of technology solutions for the energy industry. The company carries a Zacks Rank #4 (Sell).

A few better-ranked players in the same industry include ProPetro Holding Corporation (PUMP - Free Report) , Flotek Industries, Inc. (FTK - Free Report) and Solaris Oilfield Infrastructure, Inc. (SOI - Free Report) . While ProPetro sports a Zacks Rank #1 (Strong Buy), Flotek Industries and Solaris Oilfield carry a Zacks Rank #2(Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ProPetro’s earnings are expected to witness a year-over-year increase of 375.52% in 2018.

Flotek Industries earnings are expected to witness a year-over-year increase of 542.86% in 2018.

Solaris Oilfield earnings are expected to witness a year-over-year increase of 210.38% in 2018.

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