We are initiating coverage on FMC Technologies Inc. (FTI) with a Neutral recommendation and a target price of $55.

Incorporated in 2000, Houston, Texas-based FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry. The company, which operates 19 manufacturing facilities in 14 countries, is engaged in the designing, producing and servicing technologically sophisticated systems and products such as subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions and marine loading systems for the oil and gas industry.

We like FMC Technologies’ diversified product portfolio, specialty service capabilities and proprietary technological expertise. A strong presence in the subsea systems market, growing international operations and the still-favorable outlook for the deepwater offshore markets are other positives in the FMC Technologies story.

To date, FMC Technologies has remained relatively unscathed from the current economic downturn, as most of the company’s work contracts are with major integrated oil companies. The oil drilling equipment maker also maintains a healthy backlog that offers long-term earnings and cash flow visibility.

However, the industry-wide slump continues to weigh on the company’s profits, and the scenario is unlikely to change much during the next few quarters. We also remain wary of the company’s operations in economically and politically volatile regions such as North Africa, West Africa, the Middle East, Latin America and Asia Pacific.

Considering these factors, we feel that the stock will perform in line with the broader market.

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