Cameron International Corp.’s (CAM) - (Analyst Report) second-quarter results were better-than-expected, buoyed by wider margins at its Drilling & Production Systems (DPS) segment. Earnings per share, excluding one-time items (severance-related charge and tax gains), came in at 60 cents, above the Zacks Consensus Estimate of 47 cents.
On a year-over-year basis, Cameron’s adjusted earnings per share fell 8%, while revenue declined 14% to $1.3 billion, reflecting slowdown in orders across all business lines.
Gross profit during the period came at $429.3 million, up 3% year over year, primarily driven by cost reductions. Gross profit margin rose approximately 561 basis points year over year to 34.2%.
Revenue for the DPS segment totaled $862.3 million, a decrease of more than 9% from the year-ago quarter, mainly due to the timing of certain sub-sea project deliveries. The DPS segment EBITDA, however, increased 14% year over year to $184.3 million on the back of improved project-related margins.
Quarterly revenue in the Valves & Measurement (V&M) segment totaled $271.8 million, down 26% year over year, while the segment EBITDA witnessed a 33% year-over-year fall to $52.5 million. This was on account of a substantial drop in North American business activity levels.
Revenue in the Compression Systems (CS) segment totaled $135.9 million, a fall of 16% year over year. The segment’s EBITDA was $26.2 million, down nearly 11% year over year. Cost-control initiatives helped in restricting the downside in profitability.
During the quarter, Cameron received orders totaling $901.8 million, down 50% year over year due to declines in every business segment on the back of overall market weakness and a lack of large project awards. The composition of current order booking is: DPS – 66%, V&M – 22% and CS – 12%. At the end of the second quarter, total backlog stood at $5.0 billion, down 11% from the year-earlier level, again reflecting soft markets and the lack of sizable project awards.
Capital Expenditure & Balance Sheet
During the quarter, Cameron spent $58.8 million on capital expenditures, with the full-year budget expected to be approximately $220 million. As of June 30, cash and cash equivalents stood at $1.5 billion, while total long-term debt stood at $1.4 billion (debt-to-capitalization ratio of 35%).
Management guided towards third-quarter earnings in the range of 50–55 cents per share and full-year 2009 earnings of $2.15–$2.25 per share (up from the earlier range of $1.85–$2.00). The company further indicated that it expects subsea market activity to pick up during the second half of the year and is optimistic on certain valve and compression related areas.
We currently rate Cameron shares as Outperform.