(CAM) Cameron International Sees Profits Surge

Oil drilling equipment maker Cameron International Corp. (CAM) reported third quarter earnings per share (excluding special items) of 78 cents, exceeding the 64 cents (adjusted) earned in the prior-year quarter and the Zacks Consensus Estimate of 74 cents. The outperformance reflects robust profitability from its ‘Drilling & Production Systems’ and ‘Valves & Measurement’ segments.

Quarterly revenue, at $1,685.9 million, was up 10.4% year over year but came below the Zacks Consensus Estimate of $1,795.0 million.

Segment Analysis

Drilling & Production Systems (DPS): Revenues for the DPS segment totaled $977.2 million in the third quarter, up 3.5% from the year-ago quarter, while the DPS segment EBITDA rose 20.2% year over year to $223.1 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 $434.4 million, up 38.9% year over year. The segment EBITDA increased 69.3% year over year to $91.4 million. The positive comparisons were driven by strong North American business activity levels.

Process & Compression Systems (PCS): Revenues in the PCS segment increased 1.4% year over year to $274.3 million. However, the segment EBITDA witnessed a year-over-year fall of 40.1% to $33.8 million.

Backlog

During the quarter, Cameron received orders totaling $2,003.1 million, up 35.4% year over year, reflecting increases across the DPS and V&M segments. The composition of current order booking is 57% for DPS, 26% for V&M and 17% for PCS.

As of September 30, 2011, total backlog stood at $5,787.5 million, up from the year-earlier level of $4,935.4 million, driven by higher backlog across all segments.

Capital Expenditure & Balance Sheet

During the quarter, Cameron’s capital expenditure amounted to $94.2 million. As of September 30, 2011, cash and cash equivalents stood at $1,536.5 million, while total long-term debt (including the current portion) was $1,587.2 million (with debt-to-capitalization ratio of 25.6%).

Guidance

Management increased its EPS guidance range for fiscal 2011 to $2.63 – $2.66 from the earlier guidance range of $2.55 – $2.65.

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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