In the second quarter,
offshore standout
FMC Technologies (NYSE: FTI) wowed us with
some record profits. At the time, the company cautioned that
a repeat couldn't be expected, on account of a favorable
project mix and other one-off benefits. Well, here the
oilfield outfitter is three months later, detailing another
killer quarter.
The key Energy Production Systems segment, which includes
FMC's prized subsea systems line, racked up a nearly
identical performance compared to last quarter. Segment
operating margins topped 15% again, compared to the 12% to
13% that management prepared us for last time around. The
subsea business saw not only strong margins, but also good
volumes.
As for FMC's surface wellhead and fluid control
businesses, North American sales were more sluggish, but
appear to be bottoming out. Overall, revenue and earnings
came in ahead of analyst expectations -- which were obviously
shaped by FMC's conservative commentary.
On the conference call, management highlighted deepwater
success stories around the world, from
Petrobras (NYSE: PBR) and
ExxonMobil (NYSE: XOM) in Brazil to
Anadarko Petroleum (NYSE: APC) and
Tullow Oil in West Africa. Each discovery
translates to future potential equipment sales for FMC and
competitors like
Cameron (NYSE: CAM) and
Dril-Quip (NYSE: DRQ).
The future looks bright for this firm. It's not
surprising, then, that FMC has been busy buying back shares
over the past few years. Taken alone, the quarter's
repurchase of slightly less than 1 million shares isn't
particularly noteworthy. But the more than 26 million shares
FMC has bought back since 2005 are very significant. That's
more than 20% of the current share count. Just as
importantly, the average purchase price for those purchases
was far below today's trading range. Now
that'sa buyback program I can get behind.
This is a great business, but the shares aren't exactly a
bargain today. Those looking for a cheaper deepwater date
might want to consider
Noble (NYSE: NE) or
Acergy . If you've got other ideas, don't be
shy. Share with the group in the comments section below.
This article was originally published as
Underpromising and Overdelivering Offshoreon
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