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FMC Technologies Is Worth BUYING

|Includes: TechnipFMC plc (FTI)

"FMC Technologies, Inc. is a global provider of technology solutions for the energy industry. The Company designs, manufactures and services a range of systems and products, including subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions and marine loading systems. Its segments include Subsea Technologies, Surface Technologies and Energy Infrastructure. The Subsea Technologies segment designs and manufactures products and systems, and provides services used by oil and gas companies involved in deepwater exploration and production of crude oil and natural gas. The Surface Technologies segment designs and manufactures products and systems, and provides services used by oil and gas companies involved in land and offshore exploration, and production of crude oil and natural gas. The Energy Infrastructure segment's products and services include Measurement Solutions, Loading Systems and Separation Systems."

Subsea Technologies is 74% of revenues, Surface Technologies is 19%. Energy Infrastructure is 7%.

Basically, Subsea Technologies drives results.

What are Subsea Technologies?

"Subsea Systems

FMC Technologies' subsea systems business encompasses a wide range of equipment and technologies that are required to explore, drill and develop offshore oil and gas fields. We have a strong global presence in all of the world's major basins. Whether it is high-pressure, high-temperature (HPHT) trees and wellheads, subsea controls and systems or production optimization services, we add value to our customers throughout the life of the field.

Our subsea systems business continued to capitalize on the growing demand for deepwater oil and gas production with our subsea separation, boosting and processing systems. We provide the technology to increase oil recovery for mature projects and to develop new projects that may otherwise be considered economically unviable or inaccessible."

Further:

"FMC Technologies' subsea technology encompass a wide range of equipment and solutions that are required to explore, drill and develop offshore oil and gas fields. We have a strong global presence in all of the world's major basins and remain the industry leader in market share for subsea trees. Being a global manufacturing leader with facilities worldwide enables FMC Technologies to machine major components; assemble equipment; and perform required qualification testing, acceptance and systems integration testing.

Our subsea technologies, and the value we bring to customers, can be categorized in three areas: field development, subsea processing and production enhancement. Whether it is high-pressure/high-temperature (HP/HT) trees and wellheads, subsea controls and system or production optimization services, we add value to our customers throughout the life of the field.

FMC Technologies offers a full range of engineering and customer support services such as field development studies with graphical tools, system engineering, flow assurance and project management."

So basically, they help clients (major oil PRODUCERS) produce, process and enhance offshore oil production. Now business is DOWN big time.

In 2013, there were 553 Tree awards. In 2016, that figure is estimated to fall to 119. Off shore drilling is being hit the hardest since it is the most expensive. Will it rebound? YES. When? No one knows. So the worse things get, the better for investors!

Let's look at financials. Revenues are down sharply as E&P companies have cut production and orders. Next year the forecast is for revenues to be down to $4.5b. That down from a peak of $8b. Yet the company is expected to make $1 in net income. At its peak, the business did $2.7 in EPS. So there isn't a huge amount of operating leverage here, and CAPEX is very tame too. The stock price is only really down from $60 to $25, so its definitely taken a beating. I think this is an interesting company to start accumulating. It's not clear how bad industry conditions get, but this is a decent (albeit not spectacular, given Gross Margins are 20% or so).

If there's panic in the oil markets, this might make for an interesting play.

Here are the quarterly results for the segment we are interested in:

"Subsea Technologies

Subsea Technologies second quarter revenue was $854.2 million, down 31 percent from the prior-year quarter. After excluding $29.2 million of negative impact due to the strong U.S. dollar, total revenue was down 29 percent from the prior-year quarter.

Subsea Technologies operating profit in the second quarter was $97.2 million. Operating results include a $3 million negative impact related to the strong U.S. dollar. Adjusted operating profit was $120.2 million, excluding charges of $23 million. Total operating profit, excluding foreign currency impact and charges in both periods, was down approximately 33 percent year-over-year, primarily due to the decline in subsea revenues.

Subsea Technologies operating margins were 11.4 percent; adjusted operating margins were 14.1 percent, excluding charges as detailed in the attached financial schedules.

Subsea Technologies inbound orders for the second quarter were $334.1 million. Backlog was $2.9 billion."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.