TechnipFMC (FTI) Q1 Earnings and Revenues Miss Estimates

TechnipFMCplc FTI shares declined almost 8% in after-hours trading on Wednesday after the company reported first-quarter 2020 adjusted loss of 11 cents per share. Meanwhile, the Zacks Consensus Estimate was of earnings of 22 cents. Moreover, the year-earlier quarter's adjusted earnings came in at 6 cents.This underperformance can be primarily attributed to the coronavirus-induced vulnerable market scenario and lower-than-anticipated profits from the Technip Energies (previously Onshore/Offshore) segment, which is the major contributor to the company’s bottom line. Precisely, adjusted EBITDA from the unit totaled $167.1 million, lagging the Zacks Consensus Estimate of $182 million.

Meanwhile, for the quarter ended Mar 31, the company’s revenues of $3.13 billion missed the Zacks Consensus Estimate by 8.8% but increased 7.5% from $2.9 billion a year ago owing to strong revenue contributions from the company’s Subsea and Technip Energies unit.

In the first quarter, this seabed-to-surface oilfield equipment and services provider’s inbound orders plunged 66.1% from the year-ago period to $2.09 billion.

The company’s backlog increased in the first quarter. TechnipFMC’s order backlog stood at $21.9 billion, improving 23.5% from the year-ago quarter.

Subsea: The segment’s revenues in the quarter under review were $1.25 billion, up 5.7% from the year-ago sales figure of $1.18 billion owing to solid inbound orders in the prior periods and strong activities in the United States as well as Norway. Meanwhile, adjusted EBITDA of $104.8 million declined 25% year over year due to operational adversity from the coronavirus and the absence of more favorably-priced backlog, which aided the prior-year quarter. Quarterly inbound orders slumped 56.2% to $1.17 billion while backlog rose 4%.

Technip Energies (Onshore/Offshore has been renamed Technip Energies and includes Genesis, Loading Systems and Cybernetix): This segment generated revenues worth $1.54 billion, increasing 15.9% from the prior-year quarter. Revenues were driven by TechnipFMC’s business of process technology as well as robust activity in Europe and North America. In the first quarter, this unit reported $167.1 million in adjusted EBITDA, down from $194.8 million in the prior-year quarter. Management attributed this downswing to weak project execution, particularly in the Yamal LNG project, and soft margin realization from early-stage projects including Arctic LNG 2. Inbound orders were down 82.1% to $560.6 million but the segment’s backlog jumped 39.6% year over year to $13.76 billion at the end of the quarter.

Surface Technologies: This is the company’s smallest segment that  recorded revenues of $329.5 million, down 16.1% year over year, primarily due to slowdown in North American completions activity. This was partly offset by higher revenues from the international energy markets. Adjusted EBITDA was down 18.6% to $24.5 million due to volume and pricing woes in North America. The segment’s inbound orders and backlog dipped 0.5% and 3.6%, respectively, in the quarter under review.

Financials

In the reported quarter, TechnipFMC spent $83.5 million. Meanwhile, cash flow from operations for the quarter came in at $27.9 million. As of Mar 31, the company had cash and cash equivalents of $4.9 billion and a long-term debt of $3.8 billion with a debt-to-capitalization ratio of 48.5%.

Recently, the company lowered its dividend by 75% on an annualized basis to 13 cents per share due to the coronavirus pandemic resulting in crude price crash. TechnipFMC’s lowered payout will reduce its yearly cash outgo for 2020 by $175 million from 2019. It further plans to pay its 2021 dividend in quarterly instalments starting April next year.

Additionally, the company announced revised compensation through the year-end including a 30% salary cut for the chairman and CEO; a 30% reduction in the board of directors’ retainer and a 20% decrease in the salaries of executive leadership team.

TechnipFMC plc Price, Consensus and EPS Surprise

TechnipFMC plc Price, Consensus and EPS Surprise

TechnipFMC plc price-consensus-eps-surprise-chart | TechnipFMC plc Quote

2020 Guidance

TechnipFMC provided full-year guidance for its operating segments. The company expects revenues from the Subsea and Technip Energies units to be around $1 billion and $6.3-$6.8 billion, respectively. For the Technip Energies segment in particular, the revenue projection is a steep downward revision from the earlier range of $7.5-$7.8 billion. Further, the company set minimum EBITDA margin target of 10% for the Technip Energies segment. In a grim reminder of the difficult operating environment, the company expects subsea inbound orders in 2020 to fall by as much as 50% from the previous year.

Earlier this month, the London-based company slashed its 2020 capex guidance by 30% from the past projection due to the sudden oil price slump induced by the coronavirus pandemic. The company now anticipates to shell out $300 million as capital expenditures.

The company now chalked out a plan of action to determine additional savings of more than $220 million to cover all business segments and support functions. Total annualized savings are now estimated to exceed $350 million.

Zacks Rank & Stocks to Consider

TechnipFMC has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Murphy USA Inc. MUSA, Comstock Resources, Inc. CRK and Southwestern Energy Company SWN, each stock carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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