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Earnings Preview: FMC Technologies

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A leading manufacturer and supplier of  technology solutions for the energy industry, FMC Technologies Inc. (FTI - Free Report) is expected to report its second quarter 2011 earnings results on Monday July 25, after the market closes.

The Zacks Consensus Estimate for the second quarter is 38 cents per share, with a downside risk of 2.6%, on revenue of $1,184.0 million.

Previous Quarter Recap

FMC reported first quarter 2011 earnings per share from continuing operations (excluding a tax benefit of 3 cents) of 32 cents, which lagged the Zacks Consensus Estimate of 37 cents and the year-ago profit of 40 cents. The weaker-than-expected results were mainly due to lackluster results from its ‘Energy Production Systems’ unit.

Revenue of $1,081.9 million fell short of our expectation of  $1,140.0 million but managed to surpass the first quarter 2010 level of $1,050.3 million.

As of March 31, 2011, the company had cash and cash equivalents of $376.8 million and long-term debt of $414.6 million, with a debt-to-capitalization ratio of 22.4%.

Agreement of Analysts

The analysts exhibit an optimistic sentiment for FMC for the to-be reported quarter based on its diversified product portfolio, specialty service capabilities and proprietary technological expertise.

In the last 30 days, out of the 22 analysts covering the stock, 5 analysts have raised their estimates for the second quarter 2011, while one analyst slashed the estimate. In the last 7 days, one analyst has revised its estimate upward, while one analyst has reduced it.

Magnitude of Estimate Revisions

With no effect from the earnings revisions by the analysts in the last 30 days, the Zacks Consensus Estimate for the second quarter of 2011 remained unchanged at 38 cents. For the past 7 days, the Consensus Estimate for the quarter dropped by a penny to 38 cents.

Surprise History

FMC exhibited a mixed earnings surprise trend over the last four quarters. The company recorded a minimum surprise of negative 13.51% in first quarter 2011 while a maximum of 11.43% in second quarter 2010. On average, the earnings surprise was a negative 1.97%.

Our Recommendation

We believe that FMC Technologies, supported by its dominant market share, technology leadership and efficient execution skills, remains better positioned to navigate the uncertain environment better than other industry players.

Texas-based FMC Technologies faces stiff competition from with peers such as Cameron International Corporation and Oil States International (OIS - Free Report) . Moreover, with markets remaining competitive and pricing likely to be weak, we believe FTI shares are fairly valued and expect them to perform in line with the broader market. We are maintaining a long-term Neutral rating on the stock.

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