Why Is FMC Technologies (FTI) Up 16.5% Since Last Earnings Report?
A month has gone by since the last earnings report for FMC Technologies (FTI). Shares have added about 16.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FMC Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TechnipFMC Q3 Earnings & Revenues Lag Estimates
TechnipFMC reported reported third-quarter 2022 adjusted earnings of 3 cents per share, lagging the Zacks Consensus Estimate of 9 cents. This underperformance was due to lower-than-expected sales in the reported quarter and higher costs and expenses.
Adjusted EBITDA from the Subsea unit for the reported quarter totaled $183.8 million, beating the Zacks Consensus Estimate of $172 million. Meanwhile, the Surface Technologies unit’s profit came in at $40.8 million, underperforming the Zacks Consensus Estimate of $41.36 million.
For the quarter ended Sep 30, this seabed-to-surface oilfield equipment and services provider’s revenues of $1.73 billion marginally underperformed the Zacks Consensus Estimate of $1.74 billion, primarily due to lower-than-expected revenues from the Surface Technologies segment. However, revenues increased from the year-ago quarter’s $1.58 billion. This could be attributed to better-than-anticipated revenues of the Subsea unit.
Giving some respite to investors, FTI’s third-quarter inbound orders increased by 35.4% from the year-ago period’s level to $1.85 billion, reflecting strong revenue visibility.
Also, the company’s backlog rose. As of September end, TechnipFMC’s order backlog stood at $8.84 billion, improving by about 26.3% from the 2021 reading.
Segment Analysis
Subsea: Revenues in the quarter under review were $1.41 billion, up 1.46% from the year-ago sales figure of $1.31 billion due to higher project installation activity in Brazil and Guyana. Adjusted EBITDA was reported at $183.8 million, up by about 25.5% from the year-ago quarter’s level due to improved margins in the backlog and increased installation activity. The quarterly inbound orders jumped 25.5% to $1.4 billion, while the backlog rose 14.1%.
Surface Technologies: This smaller segment of the company recorded revenues of $318 million, up 19% year over year due to revenue growth globally, with particular strength in the Middle East.Moreover, the unit’s adjusted EBITDA increased by 43.7% to $40.8 million due to higher international activity, including the progressive ramp-up in the Middle East volume and the timing of associated costs. The segment’s inbound orders rose significantly by about 79.8%, while the quarter-end backlog increased by 263%.
Financials
In the reported quarter, TechnipFMC spent $30.9 million on capital programs. As of Sep 30, the company had cash and cash equivalents of $711.5 million and long-term debt of $1.13 billion, with a debt-to-capitalization of 26.3%.
2022 Outlook
TechnipFMC retained revenue expectations from the Subsea unit in the $5.2-$5.6 billion range for 2022 and maintained the Surface Technologies unit’s 2022 revenue guidance between $1.15 and $1.30 billion.
This London-based oilfield services provider maintained its free cash flow projection for 2022, which is expected in the $100-$250 million band.
The company updated its annual capital expenditure guidance from $230 million to $180 million for 2022 but stuck to its earlier net interest expense outlook in the band of $105-$115 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -21.98% due to these changes.
VGM Scores
At this time, FMC Technologies has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FMC Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
FMC Technologies belongs to the Zacks Oil and Gas - Field Services industry. Another stock from the same industry, Liberty Oilfield Services (LBRT), has gained 1.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Liberty Oilfield Services reported revenues of $1.19 billion in the last reported quarter, representing a year-over-year change of +81.8%. EPS of $0.78 for the same period compares with -$0.22 a year ago.
Liberty Oilfield Services is expected to post earnings of $0.70 per share for the current quarter, representing a year-over-year change of +333.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +5.7%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Liberty Oilfield Services. Also, the stock has a VGM Score of A.
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