A month has gone by since the last earnings report for FMC Technologies (FTI - Free Report) . Shares have lost about 14.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is FMC Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
TechnipFMC Puts Up a Stellar Show in Q2
TechnipFMC reported adjusted earnings of 39 cents a share, topping the Zacks Consensus Estimate of 35 cents. The outperformance was attributed to better-than expected contribution from all the three segments of the firm. The bottom line was also higher than the year-ago earnings of 28 cents a share on the back of robust contribution from the Onshore/Offshore segment. Notably, adjusted EBITDA from the Onshore/Offshore unit in the reported quarter increased 65% from the year-ago figure. Second-quarter revenues came in at $3,434.2 million, beating the Zacks Consensus Estimate of $3,257 million and increasing 16% from the prior-year figure of $2,961 million.
On a further encouraging note, the company booked record inbound orders of $11.2 billion, skyrocketing 164.2% year over year. Markedly, the firm’s backlog skyrocketed 73.4% y/y to $25.8 billion.
Subsea: The segment’s revenues in the quarter under review were $1,508.7 million, 24% higher than the year-ago figure of $1,217.4 million. With the subsea sector regaining momentum, the company benefited from increasing activities and the achievement of key milestones on projects nearing completion. Consequently, operating profit rose 24.6% from the prior-year period to $94.6 million in the quarter under review. However, owing to competitively priced backlog and lower vessel utilization on a year-over-year basis, adjusted EBITDA declined 2.6% to $186.2 million.
Markedly, inbound orders in the first half of 2019 came ahead of full-year 2018 level on the back of ramped-up upstream operations. Inbound orders came in at $2,632.7 million, increasing 73.6% on a year-over-year basis, primarily driven by Anadarko’s Mozambique award. The increased inbound orders boosted the segment’s backlog, which totaled $8,747 million, reflecting a rise of 41.6% from the year-ago period.
Onshore/Offshore: This segment generated revenues of $1,505 million, increasing 12.1% from the prior-year quarter. Revenues were driven by increased activities on the back of recent awards in downstream, petrochemical and offshore sectors, partly offset by completion of some key projects, especially Yamal LNG. Operating profit from the segment totaled $274 million, increasing 60% from the second-quarter 2018 level, backed by strong project execution and milestone bonuses on key projects. Adjusted EBITDA also rose 65% from a year ago to $281.9 million.
The segment’s inbound orders jumped 253.4% year over year to $8,131.2 million in the quarter, primarily driven by the massive $7.6-billion worth of contract for the Arctic LNG 2 project. As such, backlog more than doubled from the prior-year period to $16,608.3 million.
Surface Technologies: The company’s smallest segment, Surface Technologies recorded revenues of $420.5 million, up 4.8% y/y mainly on higher wellhead equipment sales and fracking rental services. However, unfavorable product mix and decline in completions-related activity in North America weighed on its operating profit and adjusted EBITDA, which declined 50.5% and 35.7% y/y to $25.5 million and $46.7 million, respectively.
The segment’s inbound orders came in at $415.7 million compared with $415.3 million in the year-ago period. Backlog totaled $426.6 million in the quarter, up 2.7% from the year-ago level.
Dividend, Capex and Financials
The board of directors declared a quarterly cash dividend of 13 cents per share, payable on Sep 4, 2019 to its shareholders of record at the close of business as of Aug 30.
In the reported quarter, TechnipFMC spent $92.3 million on capital programs, whereas cash flow from operating activities totaled $96.6 million. As of Jun 30, the company had cash and cash equivalents of $4,621.3 million and a long-term debt of $3,701.0 million, with a debt-to-capitalization ratio of 26.4%.
Revised 2019 Guidance
While TechnipFMC has kept revenue and EBITDA margin forecasts for the Surface Technologies segment intact, it has tweaked projections for Onshore/Offshore and Subsea segments.
The company now expects revenues from the Subsea unit within $5.6-$5.8 billion, higher than the prior forecast of $5.4-$5.7 billion. EBITDA margin forecast is pegged a tad higher at 11.5% than the prior estimate of 11%.
Sales projections from the Onshore/Offshore segment remain unchanged in the band of $6-$6.3 billion. Increased EBITDA margin of 16.5% versus prior forecast of 14% brightens prospects.
Sales and EBITDA margin forecasts from the Surface Technologies segment remain intact at $1.6-$1.7 billion and 12%, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 6.33% due to these changes.
Currently, FMC Technologies has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, FMC Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.