Zacks_Analysts' Blog : FTI Delivers Mixed 4Q - Analyst Blog

Oil drilling equipment maker  FMC Technologies Inc. (FTI) reported a mixed fourth quarter and full-year 2010 results.

The adjusted company’s earnings per share from continuing operations in fourth quarter came at 69 cents, missing the Zacks Consensus Estimate by a penny. Compared with the year-ago quarter, earnings per share declined 8.0% from 75 cents, primarily due to lower volumes in the subsea systems and reduced operating income.

Full-year 2010 earnings were $3.06 per share, up 6.3% year over year and 4.1% higher than our projection.

The company’s quarterly revenue of $1,102.8 million surpassed our expectation of $1,056 million. On a year-over-year basis, revenue declined 4.9% from $1,160.2 million as sales declined in the company’s Energy Production Systems segment.

FMC Technologies generated total revenue of $4,125.6 million in 2010, down 6.4% year over year from $4,405.4 million. However, the company comfortably surpassed our estimate of $4,074 million.

FMC Technologies registered total segment operating profit of $149.0 million, down 1.8% from the prior-year quarter. However, on a full-year basis, operating income nudged up 2.4% year over year to $633.4 million.

Energy Production Systems

The segment generated $875.1 million in revenue in the reported quarter, down 11.5% from the fourth quarter of 2009.

Operating profit came in at $105.5 million, down 19.6% year over year. The negative comparison reflects lower volume in the subsea systems.

Energy Processing Systems

Segment revenue was up 25.9% year over year to $222.9 million, aided by strong contributions from the fluid control business.

Segment operating profit, at $43.5 million, leaped 111.2% from the year-ago quarter, attributable to well-performed fluid control business on the back of the growing North American pressure pumping market.

Backlog and Orders

As of December 31, 2010, FMC’s total backlog was $4,175.7 million, compared with $2,545.4 million at year-end 2009. Of this, backlog for Energy Production Systems was $3,879.7 million (including $3,600 million in subsea backlog), while Energy Processing Systems' backlog exited the quarter at $296.0 million.

Total inbound orders for the fourth quarter were $1,599.2 million (up 121.0% year over year) and that for full-year 2010 was $5,674.8 million (up 93.3% from the prior year).

Balance Sheet

As of December 31, 2010, the company had cash and cash equivalents of $315.5 million and long-term debt (including current portion) of $363.3 million, with a debt-to-capitalization ratio of 21.7%.

During the fourth quarter, FMC incurred $47.5 million in capital expenditure, netting $112.5 million in 2010. 

Guidance

Management issued its 2011 earnings outlook in the range of $3.20 to $3.40 per share, based on expected strong deepwater activity worldwide and solid subsea orders.

Our Recommendation

Texas-based FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry and competes with peers such as Cameron International Corporation (CAM) and Oil States International (OIS).

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 its peers.

However, diminishing sales in the Energy Production Systems unit, unstable crude oil and natural gas industrial scenario and operational risks in economically and politically volatile regions leave us apprehensive. Consequently, we maintain a long-term Neutral rating.