Cameron International Hikes Share Buyback - Analyst Blog

Oil drilling equipment maker Cameron International Corporation CAM announced that its share repurchase program has been increased by $500 million. Additionally, Cameron announced that in 2014 it has bought 12.8 million shares, spending $780 million.

Cameron has bolstered its long-term earnings and cash flow visibility on the back of the company's strong backlog, which now stands at around $11.5 billion. We believe the expanded buyback plan highlights the oilfield equipment supplier's commitment to create value for shareholders, while still allowing the flexibility to continue pursuing growth in its businesses.

Cameron has also made a first time entry in the commercial paper market with a $500 million authorization. The company stated that this commercial paper program would help it in borrowing money from the market more effectively. The fund would be used for share repurchases, in addition to other general corporate purposes.

Houston, Texas-based Cameron is a leading manufacturer of pressure control equipment used in onshore, offshore, and subsea applications for oil and gas drilling, production, and transmission.

With about two-thirds of its total revenue coming from outside North America, Cameron's international operations are expected to be a key growth driver going forward. However, this international exposure also poses risks for the company. Margins remain an issue in the compression business, given continued strength in material costs. Moreover, with markets remaining competitive and pricing likely to be weak, there is no obvious catalyst in Cameron's business to significantly push the stock price higher.

Keeping with these views, Cameron currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the energy sector such as Valero Energy Corporation VLO, Range Resources Corporation RRC and Helmerich & Payne, Inc. HP. All these stocks currently sport a Zacks Rank #1 (Strong Buy).