Oil drilling equipment maker FMC Technologies Inc. (FTI) reported marginally better-than-expected fourth quarter results, helped by robust performance from its subsea oil and gas processing systems. Earnings per share from continuing operations came in at 75 cents, a penny above the Zacks Consensus Estimate as well as the prior-year period. However, revenue was down 3.7% year-over-year to $1.2 billion, as sales declined in the company’s Energy Processing Systems segment. 

FMC’s outperformance follows that of Cameron International Corp. (CAM), another leading maker of subsea systems. Cameron released quarterly results last week that were also slightly above estimates. 

Earnings Surprise & Estimate Revisions Trend 

This was the company’s third positive earnings surprise in the past four quarters. FMC has performed well during this period, with its average earnings surprise being 10.9%. This implies that the company has exceeded the Zacks Consensus Estimate by 10.9% over the last four quarters.
 
Looking ahead, the current Zacks Consensus Estimate for the first quarter of 2010 is 64 cents, which has seen no estimate revisions in either direction over the last 30 days. The lack of directional pressure for the next quarter justifies our short-term recommendation reflected by Zacks Rank #3 (Hold), meaning that the stock should perform relatively in line with the overall market over the next 1-3 months.

Energy Production Systems 

The segment revenue for the most recent quarter was $988.8 million, an increase of 1.6% from the fourth quarter of 2008, driven by a 4% rise in sales of subsea systems. Operating profit came in at $131.2 million, up more than 10% year-over-year. The positive comparison was achieved on the back of higher margins and increased subsea volumes. 

Energy Processing Systems 

Energy Processing Systems revenues were down 22.9% year-over-year to $177.1 million. The main reasons for the underperformance can be attributed to the fluid control business, which continues to be adversely affected by the weakness in North American pressure pumping activity. Segment operating profit, at $20.6 million, declined more than 49% from the year-ago period, reflecting lower sales and operating margin in the fluid control business.
 
Backlog
 
As of Dec. 31, 2009, FMC’s total backlog was $2.5 billion, compared to $3.0 billion at Sep. 30, 2009. Of this, backlog for Energy Production Systems was $2.3 billion (including $2.0 billion in subsea backlog), while Energy Processing Systems’ backlog finished the quarter at $221.1 million. 

Capex, Share Repurchases, & Balance Sheet 

During the quarter, FMC spent $34.0 million on capital programs, while it repurchased 376,000 shares at a cost of $21.5 million. At the end of 2009, the company had cash and cash equivalents of $460.7 million and long-term debt of $420.1 billion. 

2010 Guidance 

Management guided towards 2010 earnings per share in the $2.45 – $2.65 range.
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