Manufacturer of offshore drilling and production equipment, Dril-Quip Inc. DRQ reported first-quarter 2014 adjusted earnings of $1.04 per share, missing the Zacks Consensus Estimate of $1.21. Quarterly performance was overshadowed by the exclusion of approximately $10 million of revenue related to equipment completed but not accepted for delivery by one of its major customers. Quarterly earnings, however, increased from 98 cents reported a year ago.
The company registered total revenue of $204.1 million in the quarter, up from the year-ago level of $193.2 million. The reported figure was below the Zacks Consensus Estimate of $242.0 million.
Operating income grew nearly 12.2% to $58.6 million from the year-earlier level of $52.2 million. On the cost front, selling, general and administrative expenses rose 53.1% to $23.9 million from the year-earlier level of $15.6 million, while engineering and product development costs increased 19.5%.
Backlog
As of Mar 31, 2014, the company had a backlog of $1.4 billion compared with approximately $1.0 billion as of Mar 31, 2013.
Guidance
For the second quarter of 2014, the offshore drilling equipment maker expects earnings between $1.05 and $1.15 per diluted share, excluding any unusual or special charges. Additionally, based on current market conditions, Dril-Quip lowered its full-year adjusted earnings per share projection from $5.00–$5.20 to $4.70–$4.90.
Outlook
Dril-Quip's results are heavily levered with continued strength in global deepwater drilling markets, especially in South America and the Asia-Pacific region. Given the operators' long-term outlook on these projects, deepwater drilling and other related services will likely remain relatively stable amid the usual fluctuations in commodity prices.
Zacks Rank
Dril-Quip currently holds a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas sector such as Boardwalk Pipeline Partners, LP BWP, Magellan Midstream Partners LP MMP and Targa Resources Partners LP NGLS with a Zacks Rank #1 (Strong Buy) are expected to outperform.
BOARDWALK PIPLN BWP: Free Stock Analysis Report
DRIL-QUIP INC DRQ: Free Stock Analysis Report
MAGELLAN MDSTRM MMP: Free Stock Analysis Report
TARGA RESOURCES NGLS: Free Stock Analysis Report
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