Oil drilling equipment maker Cameron International Corp. (CAM) reported strong third quarter earnings, propped up by robust performance from its ‘Drilling & Production Systems’ segment.
The Houston, TX-based company came out with earnings per share – excluding special items – of $1.17, ahead of the Zacks Consensus Estimate of $1.11 and the year-ago adjusted profit of 75 cents.
Cameron’s quarterly revenue, at a record $2,678 million, was up 15.6% year over year but was below the Zacks Consensus Estimate of $2,732.0 million amid lower sales from the ‘Process & Compression Systems’ business.
Segment Analysis
Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,975 million in the third quarter, an increase of 20.7% from the year-ago period, while the DPS segment EBITDA rose 30.8% year over year to $357 million. The higher profitability could be attributed to strength in both its surface and subsea businesses.
Valves & Measurement (V&M): Quarterly revenues in Cameron's V&M segment totaled $552 million, up 10% year over year. The segment EBITDA increased 6.5% to reach $115 million, as strength in North America helped the unit’s results.
Process & Compression Systems (PCS): Revenues in the PCS segment fell 15.2% year over year to $151 million. The segment EBITDA witnessed a year-over-year deterioration of 16.7% to $15 million, on the back of operational hiccups.
Backlog
During the quarter, Cameron received orders totaling $2,581 million, down 11.2% year over year, reflecting a 15% decline in the DPS segment. The composition of current order booking is 73% for DPS, 20% for V&M and 7% for PCS.
As of Sep 30, 2014, Cameron's total backlog stood at $10,584 million, down slightly from the year-earlier level of $10,719 million, essentially due to lower backlog in the DPS and V&M segments.
Share Repurchase
Over the last nine months, Cameron repurchased 24.6 million shares for $1.6 billion, including 4.9 million shares that were repurchased during the most recent quarter.
Capital Expenditure & Balance Sheet
During the quarter, Cameron’s capital expenditures amounted to $80 million. Full-year spending is expected to be approximately $425 million.
As of Sep 30, 2014, cash and cash equivalents stood at $1,058 million, while long-term debt was $2,809 million (with debt-to-capitalization ratio of 32.6%).
Guidance
Cameron, which earlier in the year sold its ‘Reciprocating Compression’ business to General Electric Co. (GE) and the ‘Centrifugal Compression’ unit to Ingersoll-Rand Plc (IR) respectively, expects record earnings in 2014. Management underscored the impact of continued sequential improvement throughout the course of the year. The fourth quarter profitability, as seen by the company, is likely to be between $1.18 and $1.23.
Zacks Rank
Cameron – which counts National Oilwell Varco Inc. (NOV) as its competitor – currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
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