Shares of oil drilling equipment maker FMC Technologies Inc. (FTI) soared to a 52-week high of $55.32 on Wednesday, Apr 10, 2013, on the back of several positive developments. The closing price of the Houston-based company on that day was $55.27, representing a good 1-year return of 16.4% and an impressive year-to-date return of about 27.1%. The average volume of shares traded over the last 30 days stands at approximately 2.0 million.
This month, FMC Technologies has already signed two contracts with Norway’s Statoil ASA (STO), an integrated oil and gas company. Per the deals, FMC Technologies will provide subsea tools and related services to Statoil for the development of Smorbukk South Extension Project and Tyrihans oil field. The total estimated value of the orders is $143 million.
Earlier also FMC Technologies received several subsea contracts. Management believes that all these contracts will help the company to generate significant cash flows for its shareholders in the coming years, following the subsequent completion of the projects.
FMC Technologies is particularly well positioned in the subsea systems market. It is the company’s largest and fastest-growing business, accounting for about two-thirds of revenue. Subsea products have seen an increase in interest, and we expect earnings in this segment to strengthen – especially due to FMC Technologies’ leadership position in subsea production systems, including subsea trees, controls and manifold and tie-in systems.
Additionally, FMC Technologies sports long-term expected earnings and sales growth of 16.9% and 2.5%, respectively.
However, FMC Technologies relies on its ability to develop and acquire essential products and technologies that drive its operational performance and growth. If its technologies or products become obsolete, or cannot be brought to the market in a timely and competitive manner, they may face severe operational and financial dilemmas.
As a result, FMC Technologies currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Stocks to Consider
Two firms in the energy sector that are expected to significantly outperform the equity markets in the next one to three months are Calumet Specialty Products Partners LP (CLMT) and Range Resources Corporation (RRC). Both these stocks carry a Zacks Rank #1 (Strong Buy).
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