Our Neutral view for the Dril-Quip Inc. (DRQ) shares remain unchanged following the company’s better-than-expected first quarter results. Earnings came in at 74 cents per share, beating both the Zacks Consensus Estimate of 68 cents and the year-earlier profit of 63 cents.
Revenues were $142.5 million, up nearly 12% from the year-earlier level on the back of a favorable contribution from the subsea equipment business. Product revenues accounted for 85% of the total revenue, while the rest was contributed by Service revenues.
Dril-Quip enjoys a strong market share in many of its established product lines and continues to see success from its new technologies. The company is also in excellent financial health, with an almost debt-free balance sheet and a significant amount of cash on hand. This gives it the financial flexibility to take advantage of new growth opportunities.
Operating income for the quarter increased nearly 17% from the year-earlier level to $40.5 million. Operating margin increased approximately 120 basis points to 28.4%.
At the end of the quarter, the company had a backlog of $550 million, compared with $563 million in the previous quarter and $573 million at the end of the year-ago period. Management guided second-quarter EPS in the range of 64 cents to 74 cents.
Capital expenditures for the quarter were $7.6 million, compared with $13.8 million in the year-earlier quarter. At the end of the quarter, the company had $217.4 million in cash and $0.8 million in long-term debt.
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