Cameron Falls as Oil-Gear Manufacturing Squeeze Hits ProfitDavid Wethe
Cameron International Corp., the second-largest U.S. maker of oilfield gear, fell the most in five years as equipment manufacturers struggle to contain costs while seeking to meet rising demand.
Cameron fell 14 percent to $53.85 at the close in New York, its biggest drop since October 2008, after forecasting fourth-quarter earnings and 2014 revenue below analysts’ estimates.
The company hasn’t been able to expand its capacity fast enough to meet rising demand and faced higher costs as third parties helped complete customer orders, Jack Moore, chief executive officer of Houston-based Cameron, told analysts and investors today on a conference call. FMC Technologies Inc. yesterday fell the most since 2011 after lowering profit margin guidance for its largest unit, which makes subsea equipment for offshore oil drilling and production.
“Both companies are struggling to execute on their backlog due to the explosive growth,” James West, an analyst at Barclays Capital in New York, said today in an e-mail.
The global oil industry is in the midst of the fastest rush of orders for new deep-water rigs since the advent of such drilling in the 1970s. Last year’s 52 ultra-deepwater discoveries around the world, in about 7,500 feet (2,286 meters) or more of water, made for a record year in the offshore industry, David Williams, CEO at Noble Corp., told analysts and investors in a presentation earlier this year.
Cameron expects fourth-quarter earnings-per-share to be in the range of 95 cents to $1, lower than the $1.12 average of 30 analysts’ estimates compiled by Bloomberg. Revenue for next year is expected to be about $11 billion, lower than the $11.5 billion average of 26 analysts’ estimates.
FMC’s operating profit margin for its subsea-technology unit is expected to be 11 percent this year, Chief Financial Officer Maryann Seaman said yesterday on a conference call. That’s down from the 12 to 13 percent forecast in September.
“When plant utilization spikes to effectively 100 percent, which has occurred given the backlogs collected by both, then stress rises from manufacturing delays and cost overruns pressuring margins,” Scott Gruber, an analyst at Sanford C. Bernstein & Co. in New York, wrote in an e-mail message.