Dril-Quip Inc. (DRQ), the manufacturer of offshore drilling and production equipment, reported second-quarter 2014 adjusted earnings of $1.31 per share, beating the Zacks Consensus Estimate of $1.16. Quarterly earnings also increased from $1.07 reported a year ago.
The company registered total revenue of $230.3 million in the quarter, up from the year-ago level of $222.0 million. However, the reported figure was below the Zacks Consensus Estimate of $235.0 million.
Operating income grew 22.7% to $69 million from the year-earlier level of $56.2 million. On the cost front, selling, general and administrative expenses rose 9.7% to $25.5 million from the year-earlier level of $23.3 million, while engineering and product development costs increased 16.1%.
Backlog
As of Jun 30, 2014, the company had a backlog of $1.32 billion compared with approximately $1.14 billion as of Jun 30, 2013.
Guidance
For the third quarter of 2014, Dril-Quip expects earnings between $1.20 and $1.30 per diluted share, excluding any unusual or special charges. Additionally, based on current market conditions, the company expects full-year adjusted earnings per share of $4.70–$4.90.
Outlook
Dril-Quip’s results are heavily levered with continued strength in global deepwater drilling markets, especially in South America and the Asia-Pacific region. Given the operators’ long-term outlook on these projects, deepwater drilling and other related services will likely remain relatively stable amid the usual fluctuations in commodity prices.
Zacks Rank
Currently, Dril-Quip holds a Zacks Rank #3 (Hold). Other stocks in the oil and gas sector that are worth a look include Weatherford International plc (WFT), CNOOC Ltd (CEO) and Helix Energy Solutions Group, Inc. (HLX). All of these have a Zacks Rank #1 (Strong Buy) are expected to outperform.
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