Dresser-Rand Group Inc. (DRC), the maker of rotating equipment for the oil and gas industry, saw strong aftermarket sales in the first quarter as customers delayed new orders. The company has surprised 3 out 4 quarters by an average of 21.77%. DRC has a forward P/E of 13.

Company Description

Dresser-Rand Group manufactures centrifugal and reciprocating compressors, steam and gas turbines, expanders, portable ventilators and control systems at facilities in the United States, France, United Kingdom, Germany, Norway, India and China for the oil and petrochemical industries around the world. The company can trace its roots back to 1840.

Sales Surged 40% in the First Quarter 2009

On Apr 29, Dresser-Rand reported first quarter results and blew by analysts’ estimates by 44.83%. Net income jumped 26.8% to $34.5 million, or 42 cents per share, from $27.2 million, or 32 cents, in the year ago quarter.

Revenue rose 40% to $508.9 million from $363.8 million in the first quarter of 2008.

Aftermarket bookings generate the majority of the company’s operating income and those gained 4% to $246 million compared to the level in the year ago period. The backlog also grew by 23.8% to $424.2 million from $342.7 million at the end of March 2008.

Bookings were lower in the new unit segment as customers delayed placing new orders due to economic conditions. The company expects new unit orders to pick up in the latter part of the year. It maintains its prior guidance for the new unit segment between $700 million and $1.1 billion.

Cash Position

At the end of the first quarter, the company had cash and cash equivalents of $160 million. It also had $235.1 million available in revolving credit out of its current $500 million senior credit facility.

Consensus Estimates

Covering analysts have not yet adjusted their earnings estimates to reflect the recent quarter. However, second quarter estimates are up a penny to 58 cents in the last 30 days. 2009 estimates were also higher by a penny to $2.40 per share over the same period.

Value Fundamentals

Dresser-Rand Group is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 13. It has a price-to-book of 2.82. The company also has an outstanding 5-year return on equity (ROE) of 15.79%.

Zacks Investment Research
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