Risk, Reward Balanced For FMC Tech - Analyst Blog

We are maintaining our 'Neutral' recommendation on oil drilling equipment maker FMC Technologies Inc. (FTI) with a price target of $92.

Houston, Texas-based FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry. The company, which operates 25 manufacturing facilities in 15 countries, is engaged in the designing, producing and servicing technologically sophisticated systems and products such as subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions and marine loading systems for the oil and gas industry.

Given its dominant market share, technology leadership, efficient execution skills, and backlog of more than $3.6 billion, FMC Technologies remains better positioned to navigate the uncertain environment than many of its peers. Furthermore, we believe that the company is poised to benefit from the improving subsea activity levels through 2010 and beyond.

However, FMC Technologies is not immune to a decline in exploration activity or in energy prices, which translates into less work for the company. Though the situation has improved modestly of late (with oilfield service companies seeing more stable demand), we believe that the industry-wide slump is still far from over.

As such, we expect FMC Technologies' growth potential to be restrained and see the shares performing in line with the market. Our long-term 'Neutral' recommendation is supported by Zacks #3 Rank (short-term Hold rating), in line with its oilfield service peers National-Oilwell Varco (NOV) and Cameron International Corp. (CAM).

 
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