Dain on CAM Part II:
CAM:B-Spec;PART 2 OF 2: GUIDANCE MOVES UP, DEEPWATER ORDER WON, MORE TO COME
Cooper Energy Services, continued, Revenues were down 20% versus last
year and 11% sequentially but EBITDA margins improved to 9.6% from 6.7% last
quarter and 5.5% last year with the shutdown of the Superior line. Orders at
CES for the quarter were the second highest in history in the continued lines
driving revenues and margins higher.
Cooper Turbocompressor, approximately 10% of revenues, saw heavy increases
in R&D and new product development drop EBITDA margins from 29% last quarter
and 22.5% last year to 14.2% in the first quarter with revenues down 10%
sequentially and up 28% versus last year. The segments were plant air, up
40%, process & air separation up 20%, and parts & repair down 20%, all versus
last year. New products such as air-cooled plant air equipment, larger
horsepower process equipment, and aiming at new margins should continue to
keep margins depressed through the current quarter but returning to the 20%-
plus range by the end of the year.
Debt increased to $233 million from $192 million due to inventory increases
in Cameron and CCV. Debt to capital moved to a very conservative 21.7% level
at the end of the quarter from 18.6% at the end of 2000. The current debt
facility expires in March 2002 so most of the debt moved into current
liabilities as short-term debt. Total debt is expected to increase some
during the current quarter but strong cash generation later in the year
should put total debt at the end of 2001 at approximately the same level as
the end of 2000. A caveat is that if a number of large subsea equipment
orders come in, working capital would increase, pushing debt higher but that
is a high-class problem. We believe it is likely that the company will lock
in long-term debt probably in the public markets sometime this year as rates
are very attractive and while interest costs could be 100 basis points higher
in the near term, the long-term security is appealing and we would consider
that to be positive.
Orders overall increased by 33% during last year with Cameron at 60% of the
backlog, increasing by 31%, driven primarily by the $45 million West African
order. Total backlog increased by 20% from 2000 year end and by 25% versus a
year ago to stand at $634 million.
Earnings guidance was for a 25%-30% sequential increase in the second
quarter. Incorporating the March quarter numbers into our model and looking
at the drilling rig count driving surface equipment orders in Cameron, the
increase in infrastructure driving valve sales, demand growth in compressors
and other factors that drive our model, we independently agree with that
guidance. For the year, our model comes out to $2.13 versus guidance of
$2.10-$2.20.
We are raising our 2002 estimate to $2.13 from $1.91 and to $3.28 from
$3.19.
Stock Opinion
We are raising our price target to $95 per share from $80. Our revised price
target is based on a 15 multiple of enterprise value to estimated 2002
EBITDA, a 20% premium to the current peer group average for 2002 and a 20%
discount the 2000 peer group average of 18.6x. Our price target is a 12-month
price target and we assume that the forward multiple continues through the
cycle of next year. We are maintaining our Buy-Speculative rating on CAM
shares.
Company Description
Cooper Cameron Corporation is a leading provider of pressure-control
equipment, including blowout preventers, trees, and valves used in surface
and subsea environments. The company also manufactures compression equipment
for energy and industrial applications. |
