Oil drilling equipment maker Cameron International Corp. CAM reported strong third-quarter 2015 earnings, propped up by a sharp increase in operational income from its Subsea segment that reflected robust execution and cost-control initiatives. North American pricing pressure partially offset the results.
The Houston, TX-based company came up with earnings per share – excluding discontinued operations and special items – of $1.18, beating the Zacks Consensus Estimate of 81 cents. Moreover, the bottom line improved from the year-ago adjusted figure of $1.17.
Cameron’s quarterly revenue of $2,208 million also surpassed the Zacks Consensus Estimate of $2,169 million. However, the top line was down 17.6% year over year.
Segment Analysis
Subsea: Revenues for the Subsea segment totaled $758 million in the third quarter, down 2.7% from the year-ago quarter. However, the Subsea segment operating income jumped 172.7% year over year to $120 million owing to robust execution and cost-control initiatives.
Surface: Quarterly revenues in Cameron's Surface segment totaled $446 million, down from $600 million a year ago. The segment operating income of $49 million was 53.3% lower than third-quarter 2014. Low demand and pricing pressure in North America hurt results.
Drilling: Revenues for the Drilling segment totaled $673 million in the reported quarter, reflecting a decrease of 15.8% from the year-ago period. Moreover, operating income fell 8.2% to $146 million.
Valves & Measurement (V&M): Revenues in the V&M segment fell 32.6% year over year to $376 million. The segment operating income witnessed a year-over-year deterioration of 44.2% to $58 million. The decline was owing to reduced volumes.
Backlog
During the quarter, Cameron received orders totaling $1,413 million, down 45.3% year over year. The composition of current order booking is 19% for Subsea, 32% for Surface, 24% for Drilling and 25% for V&M.
As of Sep 30, 2015, Cameron's total backlog was $7,233 million, down 31.7% from the year-earlier level of $10,584 million, as all four segments saw their tally drop.
Capital Expenditure & Balance Sheet
During the quarter, Cameron’s capital expenditures totaled $60 million.
As of Sep 30, 2015, cash and cash equivalents came in at $1,627 million, while long-term debt was $2,794 million (with debt-to-capitalization ratio of 39%).
2015 Outlook
Cameron – which last year sold its ‘Reciprocating Compression’ business to General Electric and the ‘Centrifugal Compression’ unit to Ingersoll-Rand Plc IR – expects the ongoing oil price slump to impact its operating margins in fourth-quarter 2015. In more details, the company forecasts operating margins of all segments to be lower sequentially in the coming quarter. At the same time, the oil drilling equipment provider believes that its execution strength and good cost control skills will help to withstand the challenges.
Zacks Rank
Cameron currently carries a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the energy sector are NuStar Energy LP NS and Exterran Partners LP EXLP. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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