Dahlman Rose Bullish on FMC Technologies (FTI)

Dahlamn Rose & Co. is out with a research report this afternoon, where it reiterates its Buy rating on FMC Technologies FTI; it has an $80.00 price target on the stock. The DR analysts said, “(The) higher mix of lower margin backlog in the quarter drove Energy Production Systems EBIT margins down from 17.5% to 15.7%, slightly below our estimates. Subsea tree orders were $946MM, including 30 subsea trees. Book to Bill for subsea trees was 1.4X. Energy Processing System EBIT margins expanded 340bps to 17.4%, driven by orders for pressure pumping equipment. Increased demand for flowlines, frac pumps, and manifold trailers arose from a greater mix of new equipment orders, as the industry adds capacity with new orders running only 10-15% under previous peak levels.” They added, “In our view, lower priced tree orders from 2009 will eventually set the trough in margins, as increased order flow may tighten capacity and provide pricing power into 2011. Oil services guidance for acceleration of activity in 2H10 and the prospect for higher budgets in 2011 support our positive bias for the direction of the Energy Production Systems business amid currently limited visibility and guidance.” The DR analysts further noted, “Factoring guidance for the acceleration of new orders to arrive at $3.5bn in subsea backlog at end of 4Q10, lower margin backlog delivered in 2H10, and falling aftermarket revenues in the Gulf of Mexico through the end of the year, we are raising our estimates. Our 2010 EPS estimate goes to $2.91 from $2.59 and 2011 estimate goes to $3.20 from $3.05. The company guidance range remains $2.70-$2.90 for 2010.”