TechnipFMC (FTI) Q1 Earnings Beat, Announces Stock Buyback

Energy services company TechnipFMC plc (NYSE:FTI) reported first-quarter diluted earnings per share (excluding one-time items) of 71 cents, handily beating the Zacks Consensus Estimate of 33 cents. The results were driven by strong project execution, efficiencies from its industry-leading solutions and cost reduction efforts.

However, a steep contraction in project activity in the wake of plunging oil prices meant that the company’s bottom line fell sharply from the year-ago adjusted profit of $1.41.

First-quarter revenues of $3,388 million increased from $2,405.7 million a year ago but were below the Zacks Consensus Estimate of $3,808 million.

Segmental Analysis

Subsea: The segment revenue for the most recent quarter was $1,376.7 million, reflecting a decrease of 42% from the first quarter of 2016. Operating profit came in at $54.2 million, down 75% year over year. The negative comparisons reflect tough market conditions that led to lower project activity in Europe and Africa.

Onshore/Offshore: Segment revenues, at $1,764 million, were down 19% year over year due to subdued activity levels. However, operating income jumped 140% to $139.9 million on improved profitability on the back of achievement of key construction milestones.

Surface Technologies: The segment revenue for the January-March period was $248.4 million, 29% below first-quarter 2016 sales of $349.6 million on international pricing pressure and lower product sales. However, a favorable product mix and a leaner cost structure helped the company to reduce its losses to $18.6 million against $75.1 million incurred a year ago.

Backlog

As of Mar 31, 2017, TechnipFMC’s total backlog was $16,056.2 million compared with $16,380.5 million a year ago. Of this, backlog for ‘Surface Technologies’ was $9,066 million, while ‘Subsea’ and ‘Surface Technologies’ backlog finished the quarter at $6,558.2 million and $432 million, respectively.

Capex & Balance Sheet

In the reported quarter, TechnipFMC spent $51.2 million on capital programs. As of Mar 31, the company had cash and cash equivalents of $7,041.7 million and long-term debt of $3,082.8 million, with a debt-to-capitalization ratio of 18.5%.

Other Announcements

TechnipFMC said that its board of directors has approved a $500 million share buyback program and announced plans to initiate a dividend following third-quarter results.

Zacks Rank

TechnipFMC – which also announced a contract from ExxonMobil (NYSE:XOM) for a deepwater project offshore Guyana – holds a Zacks Rank #2 (Buy).

Meanwhile, one can look at better-ranked energy players like Diamond Offshore Drilling Inc. (NYSE:DO) and Cenovus Energy Inc. (TO:CVE) . Both carry Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Incorporated in 1989, Houston, TX-based Diamond Offshore is a major contract driller, providing comprehensive offshore drilling services to the global energy industry. The company has an excellent track of having outperformed estimates in each of the last four quarters.

Calgary-based Cenovus Energy is a large integrated oil company with a focus on the Canadian Oil Sands. It also produces oil and natural gas while also being involved in the transportation and refining of crude oil. The 2017 Zacks Consensus Estimate for this company is 40 cents, representing some 221% earnings per share growth over 2016. Next year’s average forecast is 46 cents, pointing to another 15% growth.

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