(CAM) Cameron International Beats The Street – Profit and Backlog Up

Oil drilling equipment maker Cameron International Corp. (CAM) reported strong second quarter 2011 results, driven by robust performance from its ‘Drilling & Production Systems’ and ‘Valves & Measurement’ segments.

The company’s earnings per share (excluding special items) for the quarter came in at 66 cents, exceeding the 58 cents (adjusted) earned in the prior-year quarter and the Zacks Consensus Estimate of 64 cents.

Cameron generated total revenue of $1,741.1 million in the quarter, above the Zacks consensus Estimate of $1,648.0 million and up 19.9% from the year-ago level.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $1,002.7 million in the second quarter, up 19.9% from the year-ago quarter, while the DPS segment EBITDA rose 11.4% year over year to $187.3 million. The improved performance came on the back of higher level of subsea sales.

Valves & Measurement (V&M): Quarterly revenues in the V&M segment totaled $426.5 million, up 31.1% year over year. The segment EBITDA increased 52.3% year over year to $85.6 million. The positive comparisons were driven by strong North American business activity levels.

Process & Compression Systems (PCS): Revenues in the PCS segment increased 7.2% year over year to $311.9 million. However, the segment EBITDA witnessed a year-over-year fall of 22.8% to $43.3 million on account of the retrospective revision of the prior period data to reflect the change in segments during the third quarter of 2010.

Backlog

During the quarter, Cameron received orders totaling $2,387.3 million, up 71.9% year over year, reflecting increases across the three business segments. The composition of current order booking is 60% for DPS, 22% for V&M and 18% for PCS.

As of June 30, 2011, total backlog stood at $5,519.6 million, up from the year-earlier level of $4,921.6 million, higher backlog across all segments.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditure amounted to $72.4 million. As of June 30, 2011, cash and cash equivalents stood at $2,043.1 million, while total long-term debt (including the current portion) was $1,954.6 million (with debt-to-capitalization ratio of 29.2%).

Guidance

Management guided toward earnings per share between 70 to 75 cents for the third quarter. The company also increased its EPS guidance range for fiscal 2011 to $2.55 – $2.65 from the earlier guidance range of $2.50 – $2.60.

Our recommendation

Cameron, which competes with FMC Technologies Inc. (FTI) and National-Oilwell Varco (NOV) in the ‘Oilfield Machineries and Equipment’ sector, currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

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