Can Onshore/Offshore Unit Aid TechnipFMC (FTI) Q2 Earnings?

TechnipFMC plc (NYSE:FTI) is set to release second-quarter 2019 results on Jul 24, after the closing bell. The current Zacks Consensus Estimate for the quarter to be reported is a profit of 34 cents on revenues of $3.25 billion.

In first-quarter 2019, the oilfield services provider reported adjusted earnings of 6 cents a share, lagging the Zacks Consensus Estimate of 30 cents. The underperformance was primarily attributed to lower-than-expected EBITDA from the Surface Technologies unit. Moreover, the bottom line deteriorated sharply from the year-ago period due to lower y/y contribution across all its segments.

The company’s earnings surprise history displays a dismal record. TechnipFMC missed estimates in each of the last four quarters, resulting in average of 62.74%.

However, the trend is expected to be reversed in the to-be-reported quarter as our proven model predicts that TechnipFMC is likely to beat on earnings this time around.

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for second-quarter earnings has been downwardly revised by a penny in the past seven days to 34 cents per share. Nonetheless, it indicates an increase from the year-ago reported figure of 28 cents. The Zacks Consensus Estimate for revenues is pegged at $3,250 million, suggesting an improvement from $2,961 million reported in the prior-year quarter.

Why a Likely Positive Surprise?

Our proprietary model shows that TechnipFMC is likely to beat earnings estimates in the to-be-reported quarter, as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.08%. This is because the Most Accurate Estimate is pegged two cents above the Zacks Consensus Estimate of 34 cents a share. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: TechnipFMC currently holds a Zacks Rank #3. A Zacks Rank #3, when combined with a positive ESP, makes us confident of an earnings beat.

Conversely, we caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Higher revenues and EBITDA from TechnipFMC’s Onshore/Offshore segment are expected to drive earnings in the second quarter of 2019. Increasing onshore activities and gradually improving offshore drilling bode well for its upcoming earnings release. Notably, the segment’s inbound orders jumped nearly 70% in the last reported quarter, giving a boost to the backlog, which bodes well for revenue and earnings growth of the unit in the to-be-reported quarter.

The Zacks Consensus Estimate for second-quarter revenues and adjusted EBITDA from the Onshore/Offshore unit is pegged at $1,500 million and $215 million, higher than the year-ago reported figures of $1,342 million and $171 million, respectively. During the last reported quarter, the company upwardly revised 2019 revenue and EBITDA margin forecasts for the unit, raising optimism for the upcoming results.

Moreover, revenues from the Subsea unit are estimated at $1,366 million, pointing to growth from the year-ago reported figure of $1,217 million. However, the company is likely to feel the heat from pricing pressure and weaker EBITDA margins from Subsea and Surface Technologies segments.

Overall, we expect that the improving results from the Onshore/Offshore unit are likely to offset relatively weaker contribution from Subsea and Surface Technologies units, thereby fueling TechnipFMC’s second-quarter results.

Other Stocks to Consider

TechnipFMC is not the only energy firm looking up this earnings season. Here are some other companies from energy space, which according to our model also have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Cenovus Energy (TSX:CVE) has an Earnings ESP of +13.91% and a Zacks Rank #3. The firm is expected to release second-quarter earnings on Jul 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Phillips 66 (NYSE:PSX) has an Earnings ESP of +0.66% and a Zacks Rank #3. The company is anticipated to release second-quarter earnings on Jul 26.

Enbridge Inc. (NYSE:ENB) has an Earnings ESP of +10.00% and a Zacks Rank #3. The company is anticipated to release quarterly earnings on Aug 2.

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