UPDATE: Morgan Stanley Downgrades Cameron International Ahead of Delivery Declines & Struggles

In a report published Tuesday, Morgan Stanley analyst Igor Levi downgraded Cameron International Corporation CAM to Equal-weight from Overweight, moving its price target to $66.00. According to the report, while long-term growth drivers are intact, reduced 2014 and 2015 growth in subsea and infrastructure spend is likely to further delay normalization of CAM's margins. Moreover, CAM shares have recovered nicely post the 3Q13 miss. “We expect the company's DPS margins to decline 60bps in 2014 vs. our prior expectation of a 20bps increase,” the report noted. “We expect the decline to be driven by (i) delivery bottlenecks on record rig equipment backlog as CAM struggles to bring new capacity online fast enough, (ii) sales from lower-margin subsea business growing faster than the company's higher-margin surface and drilling business in 2014, and (iii) our reduced forecast of subsea market growth for 2014 and 2015 of 8.5%/8.2%, down from our prior forecast 12.7%/14.8%. Our long-term 2013-20 subsea equipment growth rate is intact at 14.6% versus 5.5% for overall E&P global capex, so we see no need for multiple contraction for subsea and equipment names given our continued outlook for long-term growth at almost 3x the overall capex growth outlook.” Some highlights from the report included: -”Lower NAm infrastructure spend to further delay a recovery in V&M.” -”We remain constructive on increased buybacks.” CAM closed Monday at $57.65.