FMC Technologies Message Board

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Gold/Mining/Energy : FMC Technologies

FTI 41.35

-1.1%

Oct 31 9:30 AM EST

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From: Dennis Roth	2/19/2008 9:07:54 AM
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FMC Technologies (FTI): Remain Neutral given in-line outlook and expensive valuation - Goldman Sachs - February 19, 2008 What's changed FMC Technologies reported 4Q07 EPS of $0.70 – well above our and the consensus estimate of $0.62. The beat was primarily due to 10.5% higher than expected revenues and 136 bps better margins in non-core segments, while profitability in the energy business was slightly worse than our forecast. A higher than expected tax rate also negatively impacted earnings by $0.02. We raised our 2008 EPS estimates by $0.13 to $2.90 to reflect the higher subsea backlog reported in 4Q07. We also modestly raised our 2009/2010 EPS estimates by $0.03/$0.13 to $3.47/$3.80. Our 12-month price target of $58 (20x 2008 EPS) is unchanged. Implications We remain Neutral rated on FMC Technologies. While the 4Q07 results were well above expectations, the in-line outlook for 2008 was not enough to impress investors following the run-up in the stock leading up to earnings. We see it being difficult for the stock to outperform from here given that: (1) we are expecting the Energy Production backlog to be down slightly in 2008; (2) margin expansion in non-subsea businesses is likely to be challenging; (3) in the near term, larger new project awards are likely to be awarded to Cameron; and (4) we are expecting slower EPS growth in 2009, which reflects moderating growth in subsea, as well as pricing challenges in surface and Energy Processing. Valuation FMC Technologies is trading at 2008 P-E/EV-DACF of 17.5x/13.9x versus the oil services group average at 14.0x/8.1x. In our view, FMC Technologies’ premium valuation fully reflects its attractive exposure to the subsea equipment market. Key risks Key risks include a sustained decline in commodity prices and the continued decline in broader stock market indices.

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