We issued an updated research report on oil drilling equipment maker, Cameron International Corporation CAM on Apr 13, 2015. The ongoing crude price slump has curtailed deepwater drilling and subsea equipment demand. This is affecting Cameron’s revenues, earnings and cash flow. We also expect this scenario to continue in the near term.
The negative influence of the price slump is reflected in Cameron’s current Zacks Rank #4 (Sell), implying that the stock will underperform the broader U.S. equity market over the next one to three months.
As is the case with other oil services and equipment suppliers, results of Cameron are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces.
With the free fall in crude price most of the upstream energy players are demanding less drilling equipment which has been hurting Cameron’s profits. The situation will likely prevail this year too as the oil and gas exploration and production companies including drillers are slashing their 2015 capital spending following no expectation of a near-term oil price recovery.
Cameron’s margins in the compression business also remain an issue owing to continued strength in material costs.
Investors should note that Cameron plans to release first-quarter 2015 results on Apr 23, before the opening bell. The Zacks Consensus Estimate for the company’s first quarter stands at 76 cents per share.
Stocks to Consider
Not all stocks in the energy sector are expected to perform like Cameron. Better-ranked players in the same space include Valero Energy Partners LP VLP, Sprague Resources LP SRLP and Marathon Petroleum Corp. MPC.
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