TechnipFMC Stock Rallies to 52-Week High: Buy, Hold or Sell?

It has been about a month since the last earnings report for Oceaneering International (OII). Shares have added about 17% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Oceaneering International due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Oceaneering International's Q3 Earnings Lag Estimates, Revenues Beat

Oceaneering International reported an adjusted third-quarter 2024 profit of 36 cents per share, which missed the Zacks Consensus Estimate of 44 cents. This was due to lower-than-expected operating income from the company’s Subsea Robotics, Offshore Projects Group, Integrity Management & Digital Solutions and Aerospace and Defense Technologies segments.

However, the bottom line was flat year over year. This can be attributed to year-over-year strong operating income from the Manufactured Products segment.

Total revenues were $679.8 million, which beat the Zacks Consensus Estimate of $674 million and increased approximately 7.1% from the year-ago level of $635 million.

The company bought back 422,229 shares at a cost of around $10 million in the third quarter. OII reported a net income of $41.2 million and an adjusted EBITDA of $98.1 million, while consolidated operating income for the same period was $71.3 million.

OII's fleet of Remotely Operated Vehicles (ROVs) numbered 250 with a utilization rate of 69%.

Segmental Information

Subsea Robotics: The unit provides remotely operated submersible vehicles for drill support, vessel-based inspection, subsea hardware installation, pipeline surveys and maintenance services.

Revenues totaled $215.7 million compared with the year-ago quarter’s $197.3 million. The top line surpassed our projection of $201.5 million.

The segment also reported an operating income of $65.7 million compared with $47.8 million a year ago. The figure was also higher than our estimate of $60.6 million.

Manufactured Products: The segment focuses on the manufactured products business, theme park entertainment systems and automated guided vehicles.

Revenues amounted to $143.7 million, up substantially from the prior-year figure of $122.9 million. However, the top line missed our projection of $157.4 million. The segment posted an operating profit of about $11.3 million, up from the year-ago quarter’s $8.2 million. Moreover, the reported figure beat our estimate of $9.1 million.

Additionally, the backlog rose to $671 million as of Sept. 30, 2024, from $556 million as of Sept. 30, 2023.

Offshore Projects Group: This segment involves Oceaneering’s former Subsea Projects unit, excluding survey services and global data solutions and the service and rental business, excluding ROV tooling.

Revenues decreased about 1.9% to $147.5 million from $150.3 million in the year-ago quarter, due to changes in project mix in international markets, vessel crane repair costs and associated vessel downtime. However, the figure beat our projection of $144.3 million. The unit’s operating income totaled $20.3 million compared with the prior-year quarter’s $26.7 million. The figure beat our estimate of $18.7 million.

Integrity Management & Digital Solutions: This segment covers Oceaneering’s Asset Integrity unit, along with its global data solutions business.

Revenues of $73.5 million increased from the year-ago quarter’s $66.1 million. However, the figure marginally missed our projection of $73.6 million. The segment reported an operating income of $0.7 million, down from the prior-year quarter’s $3.2 million. The figure also missed our estimate of $0.9 million.

Aerospace and Defense Technologies: The segment is engaged in Oceaneering’s government business, which focuses on defense subsea technologies, marine services and space systems.

Revenues totaled $99.2 million, marginally up from $98.6 million recorded in the third quarter of 2023. Moreover, the figure beat our estimate of $97.2 million. The operating income dropped to $12.2 million from $14.1 million in the year-ago quarter and missed our estimate of $12.9 million.

Capital Expenditure & Balance Sheet

The capital expenditure in the third quarter, including acquisitions, totaled $24.9 million.

As of Sept. 30, 2024, OII had cash and cash equivalents worth $451.9 million and $461.6 million, respectively, along with a long-term debt of about $480.7 million. The debt-to-total capital was 40.6%.

Outlook

The company has updated its full-year guidance for 2024 and has introduced initial projections for 2025.

For the fourth quarter of 2024, the company expects a slight increase in consolidated revenues compared with the third quarter, while adjusted EBITDA is anticipated to remain consistent with the same.

For 2024, it anticipates consolidated adjusted EBITDA to range between $340 million and $350 million. For 2025, consolidated EBITDA is expected to be between $400 million and $430 million. Free cash flow is anticipated to exceed the 2024 level.

At the segment level, OII’s Subsea Robotics is predicted to experience a slight decline in revenues and operating profitability due to normal seasonal variations. Although revenues for Manufactured Products are expected to rise, operating profitability is likely to decline significantly. Conversely, Offshore Projects Group is expected to see increased revenues and notably higher operating profitability.

OII’s Integrity Management & Digital Solutions is anticipated to improve its operating profitability, even with a decline in revenues, while both revenues and operating profitability for Aerospace and Defense Technologies are expected to decrease. Unallocated expenses for OII are projected to be around $40 million.

Oceaneering projects increased revenues and enhanced operating performance across all segments in 2025, particularly from Subsea Robotics, Manufactured Products and Integrity Management & Digital Solutions.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 23.68% due to these changes.

VGM Scores

At this time, Oceaneering International has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Oceaneering International has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Oceaneering International is part of the Zacks Oil and Gas - Field Services industry. Over the past month, Liberty Oilfield Services (LBRT), a stock from the same industry, has gained 3.4%. The company reported its results for the quarter ended September 2024 more than a month ago.

Liberty Oilfield Services reported revenues of $1.14 billion in the last reported quarter, representing a year-over-year change of -6.4%. EPS of $0.45 for the same period compares with $0.85 a year ago.

For the current quarter, Liberty Oilfield Services is expected to post earnings of $0.17 per share, indicating a change of -68.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -16.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Liberty Oilfield Services. Also, the stock has a VGM Score of A.

Zacks Investment Research

A month has gone by since the last earnings report for Core Laboratories (CLB). Shares have added about 11.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Core Laboratories due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Core Laboratories’ Q3 Earnings and Sales Beat Estimates

Core Laboratories reported third-quarter 2024 adjusted earnings of 25 cents per share, which beat the Zacks Consensus Estimate of 21 cents. The bottom line also increased from the year-ago quarter’s reported figure of 22 cents. This can be attributed to better-than-expected performance from the Reservoir Description and Production Enhancement segments.

This oilfield service provider’s operating revenues of $134.4 million beat the Zacks Consensus Estimate of $133 million by 1.1%. The top line increased 7.5% from the year-ago quarter’s $125 million.

As of Sept. 30, 2024, Core Laboratories' net debt (defined as long-term debt minus cash and cash equivalents) was $120.5 million, reflecting a decrease of $11.8 million during the quarter. The company’s leverage ratio (calculated as total net debt divided by adjusted EBITDA) for the past four quarters improved to 1.47, down from the previous quarter's 1.66.

Segmental Performance

Reservoir Description: Revenues in this segment increased about 3.5% to $88.8 million from $85.1 million in the third quarter of 2023. Additionally, the top line beat our projection of $88 million. Operating income increased from $13 million in the year-ago period to $16.5 million and beat our estimate of $10.4 million.This was due to increased demand for reservoir rock and fluid analysis in international and U.S. markets.

Production Enhancement: This segment’s revenues increased 13.4% to $45.6 million from $40.2 million in the prior year quarter. Moreover, the top line marginally beat our estimate of $45.2 million. Operating income of $3.2 million missed our projection of $4.4 million. However, the metric increased from the year-ago quarter’s reported profit of $1.5 million.

Financials and Dividends

As of Sept. 30, 2024, this company had cash and cash equivalents of $21.5 million and long-term debt of $139.9 million. CLB’s debt-to-capitalization was 35.3%. Operating cash totaled $13 million, while capital expenditure amounted to $3 million. This led to a positive free cash flow of $10 million.

CLB’s board of directors approved a cash dividend of a cent per share on the company's common stock, payable on Nov. 25, 2024, to its shareholders of record as of Nov 4.

Outlook

For the fourth quarter of 2024, CLB expects revenues to range from $128.5 million to $135.5 million. Operating income is projected to be between $14.8 million and $17.7 million, with earnings per share expected to be between 20 cents and 25 cents.

Revenues for the Reservoir Description segment are anticipated to be between $87.5 million and $90.5 million, with operating income ranging from $13.4 million to $14.9 million.

Revenues for the Production Enhancement segment are expected to be between $41 million and $45 million, with operating income projected between $1.3 million and $2.7 million.

The company anticipates an effective tax rate of 20% for the fourth quarter. This guidance is based on projections for underlying operations and excludes any gains or losses from foreign exchange. Core Lab anticipates maintaining positive free cash flow in the upcoming quarters.

CLB expects a multi-year recovery in the international market, driven by underinvestment, increased focus on energy security and rising demand for crude oil , which should support growth in 2025. To align with this outlook, management remains focused on investing in technology and pursuing growth opportunities while staying involved in long-term international projects.

The company expects crude oil demand to rise 1-1.6 million barrels per day in 2025, according to estimates from the IEA, EIA and OPEC+. This increase is in addition to the natural decline in production from existing fields, making continued investment in onshore and offshore oil fields necessary.

In the short term, CLB anticipates that crude oil markets will be volatile due to global economic and geopolitical uncertainties. However, as international project activity grows, long-term projects in the Middle East, South Atlantic Margin, certain parts of Asia Pacific and West Africa should boost demand for Core Lab's services and products.

While Core Lab expects the U.S. land activity to decline in the fourth quarter of 2024, it should return to similar levels year over year in 2025. Current challenges include recent Exploration and Production consolidations and low natural gas prices.

For the fourth quarter of 2024, guidance for both segments accounts for delays caused by weather events in the Gulf of Mexico. Core Lab projects that Reservoir Description's revenues will remain flat or increase slightly, while Production Enhancement is projected to continue the drop in U.S. frac spread counts, along with the usual year-end slowdown in onshore completion activity.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Core Laboratories has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Core Laboratories has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Core Laboratories is part of the Zacks Oil and Gas - Field Services industry. Over the past month, Schlumberger (SLB), a stock from the same industry, has gained 6.8%. The company reported its results for the quarter ended September 2024 more than a month ago.

Schlumberger reported revenues of $9.16 billion in the last reported quarter, representing a year-over-year change of +10.2%. EPS of $0.89 for the same period compares with $0.78 a year ago.

For the current quarter, Schlumberger is expected to post earnings of $0.91 per share, indicating a change of +5.8% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Schlumberger. Also, the stock has a VGM Score of B.

Zacks Investment Research

Have you been paying attention to shares of FMC Technologies (FTI)? Shares have been on the move with the stock up 16.1% over the past month. The stock hit a new 52-week high of $30.23 in the previous session. FMC Technologies has gained 49.1% since the start of the year compared to the 11.3% move for the Zacks Oils-Energy sector and the 3.1% return for the Zacks Oil and Gas - Field Services industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 24, 2024, FMC Technologies reported EPS of $0.64 versus consensus estimate of $0.39 while it beat the consensus revenue estimate by 0.3%.

For the current fiscal year, FMC Technologies is expected to post earnings of $1.56 per share on $9 billion in revenues. This represents a 246.67% change in EPS on a 15.01% change in revenues. For the next fiscal year, the company is expected to earn $1.97 per share on $9.82 billion in revenues. This represents a year-over-year change of 26.79% and 9.12%, respectively.

Valuation Metrics

FMC Technologies may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

FMC Technologies has a Value Score of B. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 19.3X current fiscal year EPS estimates, which is not in-line with the peer industry average of 20.7X. On a trailing cash flow basis, the stock currently trades at 22.6X versus its peer group's average of 7.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, FMC Technologies currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if FMC Technologies passes the test. Thus, it seems as though FMC Technologies shares could still be poised for more gains ahead.

How Does FTI Stack Up to the Competition?

Shares of FTI have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Flotek Industries, Inc. (FTK). FTK has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of B.

Earnings were strong last quarter. Flotek Industries, Inc. beat our consensus estimate by 14.29%, and for the current fiscal year, FTK is expected to post earnings of $0.43 per share on revenue of $189.1 million.

Shares of Flotek Industries, Inc. have gained 65.2% over the past month, and currently trade at a forward P/E of 27.79X and a P/CF of 334.38X.

The Oil and Gas - Field Services industry is in the top 33% of all the industries we have in our universe, so it looks like there are some nice tailwinds for FTI and FTK, even beyond their own solid fundamental situation.

Zacks Investment Research