Cameron raises bar on full year outlook

Cameron has reported earnings per share for the second quarter of 2014 of $1.00 excluding unusual items. This compares to earnings per share for the second quarter of 2013 of $0.77 excluding unusual items.

The unusual items for the second quarter of 2014 were after-tax credits of $0.02 per share and a $0.06 per share gain from discontinued operations. The unusual items for the second quarter of 2013 were charges and the tax consequences related to the formation of OneSubsea of $0.22 and a $0.02 per share gain from discontinued operations.

The Company reported GAAP earnings per diluted share of $1.08 for the second quarter of 2014, as compared to $0.57 for the second quarter of 2013.

Year-over-year revenues increase

Revenues were a second quarter record of $2.64 billion, up nearly 20 percent from $2.21 billion a year ago. Cameron Chairman, President and Chief Executive Officer Jack B. Moore noted that each business within the Drilling and Production Systems group enjoyed sequential as well as year-over-year revenue growth. The Valves & Measurement group also saw sequential revenue improvement. Moore commented, “Revenue gains were driven by record backlogs established in 2013, better efficiency within our manufacturing operations and record North American surface and valves orders and sales.”

Margins improve sequentially

Moore stated, “Sequential margin improvement was achieved in each of our businesses, with DPS showing a 140 basis point margin expansion. Our Drilling Systems business had the largest sequential expansion. Our progress with the Drilling Systems capacity build-out allowed us to increase throughput and improve margins significantly during the quarter. We have begun a margin expansion trend driven by better pricing in our backlog, improved execution, elimination of lower margin non-core businesses and aggressive cost control.”

Orders and backlog strong

Total orders for the quarter were $2.44 billion, up from $2.24 billion a year ago, an increase of 9 percent.

“Orders for the second quarter were driven by our drilling, surface and valves businesses”, Moore said, “and with a more robust outlook for North America and several deepwater projects expected to move forward in the second half, we expect to see a record level of backlog at year-end.”

Cameron’s backlog at the end of the second quarter was $11.1 billion, down slightly from its historical high of $11.4 billion at the end of 2013. Second quarter backlog is up over 7 percent from prior year levels.

Share repurchase activity continued

The Company continued to repurchase its shares, acquiring 4.5 million shares during the quarter. Year-to-date the Company has repurchased 19.7 million shares. This follows a record year in 2013, when 27 million shares were repurchased. Fully diluted shares outstanding at the end of the second quarter were 204 million. Remaining authorization for future share repurchases was $456 million at the end of the quarter.

Capital investment opportunities continue

The Company invested $73 million in capital expenditures in the second quarter, primarily in Surface Systems and OneSubsea. Full-year capital expenditures are expected to be between $450 and $500 million. Focus will be on supporting rapidly expanding onshore markets and aftermarket services for Drilling Systems and OneSubsea.

Full-year earnings guidance raised

Based upon the Company’s expected continued margin expansion over the back half of the year as well as robust market conditions in North America, the Company is raising its full year earnings outlook to a range of $4.00 to $4.25 per share excluding unusual items. Cameron currently expects third quarter earnings from continuing operations to be in the range of $1.10 to $1.20 per diluted share excluding unusual items.