Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

New Competition Not Enough to Derail FMC Technologies, Inc. (FTI)

When Schlumberger Limited. (NYSE:SLB) and Cameron International Corporation (NYSE:CAM) formed the OneSubsea venture last November, investors in FMC Technologies, Inc. (NYSE:FTI) must have felt their guts tighten just a bit. After all, Schlumberger and Cameron are international heavyweights in their respective markets, Schlumberger being a global provider of oil and gas services, with a unique advantage in reservoir description and subsea processing, and Cameron operating as a leader in subsea equipment design and manufacturing. With its recent earnings release, FMC Tech’s management offered a dose or two of virtual antacids to investors to ease their indigestion.

FMC Technologies, Inc. (NYSE:FTI)One of the first lines that investors’ eyes dart to, typically because companies highlight it if it’s bearing good news, is the profit line. A 23% jump here in the company’s fourth quarter must have pleased shareholders and prodded them to dive deeper. Thankfully, for investors, as you begin to reach the depths of margins and specific segment results, the water remains warm and inviting.

About those antacids …
What should you be excited about, besides the bottom line? Well, aside from a higher interest expense because of debt issued for its acquisition of Pure Energy Services in October and a North American land market that has plagued the entire services industry, quite a bit. For starters, the company’s largest division, and that with which OneSubsea is in direct competition, Subsea Technologies, grew revenues by 28% over the same quarter in 2011. Looking for a one-two punch in this segment? EBIT margins leapt more than 69% in the quarter, leading to a 117% increase in overall operating profit for this segment. Even factoring in all of this growth, there is still a sizable runway for the next few years because of Subsea Tech’s $4.6 billion backlog.

One of the key takeaways from early on in the conference call was that the company increased its market share of the Subsea tree market to 40% in 2012. After the Macondo spill, equipment performance and safety were placed at the top of the value chain, especially in the North American market. This emphasis should allow FMC Tech to cement these share gains as long as its equipment lives up to its current, respected billing.

An anchor in the Western Hemisphere holding FMC Tech back
What once was a productive well of business for equipment and service providers to oil and gas companies seemingly dried up in 2012. That well is the North American land market, which bestowed profits on myriad energy companies over the past several years. Unfortunately, because of the reduced price of natural gas, many exploration and production companies have cut back on their drilling activities for the time being. This has created pricing pressures and limited sources for revenue.

Baker Hughes Incorporated (NYSE:BHI) regularly publishes its rig count, and the North American market has seen its fair share of declines. If you look at the latest report from Feb. 8, the United States land market is currently operating with 244 fewer rigs in operation than at that time in 2011. This disparity has led to lower North American revenues for all parties involved.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.