Net income was $71.7 million versus $32.1 million in the second quarter of 2009.
Revenue increased more than 18% year over year to $2.29 billion in the quarter beating the Zacks Consensus Estimate of $2.21 billion. Operating income in the quarter was up 44% year over year at $191.5 million.
With respect to business segments, M-I SWACO accounted for approximately 50% of the total quarterly revenue at $1.16 billion. This represented a year-over-year increase of 14%. The positive comparison was driven by growth in the Eastern Hemisphere, principally in Vietnam, Indonesia, Malaysia and Kuwait.
The Oilfield segment reported revenue of $650.2 million in the quarter, up 25% year over year. It was boosted by higher sales in the United States, which rose 29% year over year. All product offerings contributed to the increase in the U.S.. Revenues in the Distribution segment totaled $490.3 million, up 19% year over year, as energy sector volumes rose.
Smith International ended the quarter with a cash balance of $497.7 million. Total debt declined to $1.48 billion, representing debt-to-capitalization ratio of 17.7%. With favorable industry conditions, the company expects this year’s capex to be in the range of $420-$450 million. Smith also hinted that the company may increase its capital spending budget for the year.
Smith International has an established track record for developing and commercializing premium products and services that command increased prices and generate higher margins. The merger with Schlumberger (SLB), which is scheduled to be finalized on August 24, will provide shareholders with a more diversified oilfield services exposure. Our Neutral recommendation remains unchanged at this stage with the Zacks #3 Rank (Neutral).
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