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Why Did Forum Energy Technologies’ 1Q16 Earnings Miss Estimates?

Alex Chamberlin

Forum Energy Technologies: 1Q16 Earnings Overview

Forum Energy Technologies’ 1Q16 revenues

Forum Energy Technologies (FET) released its 1Q16 financial results on April 28. The company recorded total revenues of ~$159.4 million in 1Q16, down ~54% from $348.1 million recorded in 1Q15. Forum Energy Technologies’ revenues for the latest quarter decreased mostly due to the upstream companies’ lower drilling activity in the US.

Compared to 4Q15, Forum Energy Technologies’ revenues decreased by 18.7%. In comparison, the 1Q16 revenue for Dril-Quip (DRQ), FET’s smaller market cap peer, decreased 27% year-over-year. DRQ provides deepwater, harsh environment, and severe service applications for the energy upstream companies.

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Forum Energy Technologies’ 1Q16 earnings

The 1Q16 adjusted net earnings per share (or EPS) for Forum Energy Technologies is -$0.22. This missed the consensus sell-side analysts’ EPS estimate. Operating losses in the Drilling & Subsea and Completions segments primarily led to FET’s 1Q16 earnings falling short of analysts’ estimates.

Compared to 1Q15, when FET’s adjusted earnings were $0.30, earnings deteriorated steeply to its adjusted loss in fiscal 1Q16. In the past 13 quarters, adjusted earnings matched analysts’ estimated earnings on an average. Forum Energy Technologies is 1.3% of the iShares US Oil Equipment & Services ETF (IEZ).

What affected FET’s reported earnings in 1Q16?

In 1Q16, Forum Energy Technologies’ (FET) reported net loss was ~$22.9 million. This was much lower compared to 1Q15, when FET reported a net income of $28.7 million.

Year-over-year, FET’s income decline reflects a lower rig count and a lower exploration and drilling spend by upstream companies, driven by lower energy prices. Compared to 4Q15, when Forum Energy Technologies reported a net loss of ~$163 million as a result of a huge impairment charge, the 1Q16 reported earnings improved.

Next, we will discuss FET’s growth drivers.

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