Zacks_Analysts' Blog : Cameron Matches Estimate, Grows Y/Y - Analyst Blog

Oil drilling equipment maker Cameron International Corp. (CAM) reported fourth quarter earnings per share (excluding charges associated with the Deepwater Horizon incident) of 77 cents, exceeding the 69 cents (adjusted) earned in the prior-year quarter and in line with the Zacks Consensus Estimate. The year-over-year outperformance reflects robust profitability from its ‘Drilling & Production Systems’ and ‘Valves & Measurement’ segments.

Quarterly revenue, at $2,030.7 million, was up 12.3% year over year and also came above the Zacks Consensus Estimate of $1,878.0 million.

For the fiscal year ended December 31, 2011, Cameron reported earnings (excluding non-operating items) of $2.67 per share, a penny ahead of the Zacks Consensus Estimate and up from $2.42 per share (adjusted) in 2010. Revenues of $6,959.0 million were 13.4% above the year ago period and also managed to beat the Zacks Consensus Estimate of $6,821.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,216.0 million in the fourth quarter, up 8.8% from the year-ago quarter, while the DPS segment EBITDA rose 8.4% year over year to $246.0 million. The improved performance came on the back of higher level of subsea activity, where it competes with FMC Technologies Inc. (FTI).

Valves & Measurement (V&M): Quarterly revenues in the V&M segment totaled $462.2 million, up 37.5% year over year. The segment EBITDA increased 51.3% year over year to $92.3 million. The positive comparisons were driven by strong North American business activity levels.

Process & Compression Systems (PCS): Revenues in the PCS segment almost remained flat year over year at $352.5 million. However, the segment EBITDA witnessed a year-over-year fall of 17.2% to $38.0 million.

Backlog

During the quarter, Cameron received orders totaling $1,914.8 million, up 11.9% year over year, mainly reflecting increases across the V&M and PCS segments. The composition of current order booking is 49% for DPS, 28% for V&M and 23% for PCS.

As of December 31, 2011, total backlog stood at $5,969.1 million, up from the year-earlier level of $4,817.1 million, driven by higher backlog across all segments.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditure amounted to $159.6 million, while the full-year outlay came to $388.1 million. As of December 31, 2011, cash and cash equivalents stood at $898.9 million, while total long-term debt (including the current portion) was $1,584.8 million (with debt-to-capitalization ratio of 25.2%).

Guidance

Management gave its EPS guidance range for fiscal 2012 at $3.20–$3.30, while the first quarter profitability is likely to be in the range of 50–55 cents.

Our Recommendation

Cameron currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. Longer-term, we are maintaining our Neutral recommendation on the stock.