Oil drilling equipment maker, Cameron International Corp. (CAM)announced that it expects to record total charge of approximately 17 cents per share in the first quarter of 2011, bruised by the turmoil in the Middle East.
Cost overruns associated with a subsea project delay in Nigeria is expected to adversely affect Cameron’s first quarter results by 15 cents per share, while the forgone accounts receivable for work done in Libya, owing to the U.S. government regulations, will impose a charge of 2 cents per share.
In the fourth quarter earnings release, Cameron guided earnings per share between 63 cents and 66 cents for the first quarter and $2.65 and $2.75 for full-year 2011.
The Zacks Consensus Estimate for the first quarter 2011 earnings is pegged at 65 cents per share, while that for the full-year 2011 is $2.77.
Houston, Texas-based Cameron is a leading manufacturer of pressure control equipment used in onshore, offshore and subsea applications for oil and gas drilling, production and transmission.
Despite the geopolitical disturbances, we believe that Cameron boasts a strong backlog that provides ample visibility for its earnings growth and cash flow prospects going forward. As of December 31, 2010, the company’s total backlog stood at $4,817.1 million. We expect order flow and backlog for subsea products and services to remain healthy and trend higher.
However, the volatile oil and gas prices, uncertain commodity price outlook along with international business risks continue to weigh on the company’s shares. Cameron faces stiff competition from peers such as National Oilwell Varco (NOV) and Weatherford International Ltd. (WFT). Hence, we are maintaining our long-term Neutral recommendation on the stock.
Cameron currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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