Cameron Beats Zacks Estimates - Analyst Blog

Oil drilling equipment maker Cameron International Corp. (CAM) reported impressive fourth quarter and full year 2010 results riding on the back of strong order along with operational efficiency of long-term projects.

The company's earnings per share (excluding special items) for the quarter came in at 69 cents, surpassing 54 cents earned in the prior-year quarter and the Zacks Consensus Estimate of 67 cents.

For the full year, earnings per share (excluding special items) were $2.42, up 1.7% year over year and 0.8% ahead of our projection. 

Considering the integration expense, associated with the NATCO Group acquisition, and the litigation costs related to the Deepwater Horizon earning per share came at 66 cents for the quarter and $2.27 for the full year.

The company generated total revenue of $1,808.3 million in the quarter, up 23.5% year over year, attributed to strong contributions from all business units.  The results were also above our expectation of $1,701 million.

In 2010, total revenue was $6,134.8 million, which exceeded the Zacks Consensus Estimate of $6,001 million. On a year-over-year basis, revenue increased approximately 17.5%.

Cameron's performance looks inspiring when compared to its peer Weatherford International Ltd. (WFT), which failed to meet our expectation.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,118.2 million in the fourth quarter, up 31.1% from the year-ago quarter. The DPS segment EBITDA rose 43.2% year over year to $227.0 million.

Valves & Measurement (V&M): Quarterly revenues in the V&M segment totaled $336.2 million, up 7.7% year over year, while the segment EBITDA increased a modest 0.2% year over year to $61.0 million.

Process & Compression Systems (PCS): Revenues in the PCS segment increased 18.1% year over year to $353.9 million and the segment EBITDA witnessed a year-over-year fall of 8.2% to $45.9 million.

Backlog

During the quarter, Cameron received orders totaling $1,710.6 million, up 25.1% year over year, reflecting increases across the three business segments. The composition of current order booking is 54.5% for DPS, 25.9% for V&M and 19.6% for PCS.

As of December 31, 2010, total backlog stood at $4,817.1 million, down marginally (by 7.2%) from the year-earlier level, reflecting lower DPS backlog.

Capital Expenditure & Balance Sheet

During the quarter, Cameron's capital expenditure amounted $85.7 million. As of December 31, 2010, cash and cash equivalents stood at $1,832.5 million, while total long-term debt (including the current portion) stood at $1,292.8 million (with debt-to-capitalization ratio of 22.7%).

Guidance

Management guided toward earnings per share between 63 cents to 66 cents for the first quarter and $2.65 to $2.75 for full-year 2011.

For fiscal 2011, Cameron expects to register higher revenues by approximately 3% to 5% from the prior-year level, suggesting strong shorter-cycle businesses, which could more than offset the decline in subsea revenues.

The company aims to invest about $250 to $300 million in capital projects in 2011, with higher spending targeted toward maintenance. Cameron also has a pipeline full of various high-return and low-cost projects capable of expanding its horizon further. 

For expansion and development of facilities in Brazil, the company expects to burn up approximately $50 to $75 million, while almost $50 million will be contributed for creating a fleet of equipment intended to enhance its strength in the frac valve, tree and manifold markets.

Our Take

With a diversified product portfolio, specialty service capabilities and proprietary technological expertise, we believe Cameron remains favorably positioned in the industry. However, the uncertain commodity price outlook along with the soft global economy continues to weigh on the company's shares.

Cameron currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

 
CAMERON INTL (CAM): Free Stock Analysis Report
 
WEATHERFORD INT (WFT): Free Stock Analysis Report
 
Zacks Investment Research