Dril-Quip Earnings Preview

Dril-Quip (NYSE: DRQ  ) didn't hit the Street's expectations last quarter, but investors hope that it will rebound this quarter. The company will unveil its latest earnings Friday. Dril-Quip designs, manufactures, sells, and services highly engineered offshore drilling and production equipment suited for use in deepwater, harsh environment, and severe service applications.

What analysts say:

• Buy, sell, or hold?: The majority of analysts back Dril-Quip as a buy. But with 72.7% of analysts rating it a buy, Dril-Quip is still below the mean analyst rating of its nearest 10 competitors, which average 81.5% buys. Analysts don't like Dril-Quip as much as competitor Lufkin Industries overall. Three out of four analysts rate Lufkin Industries a buy compared with eight of 11 for Dril-Quip. Analysts haven't adjusted their rating of Dril-Quip for the past three months.
• Revenue Forecasts: On average, analysts predict $138.4 million in revenue this quarter. That would represent a decline of 2.5% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.58 per share. Estimates range from $0.55 to $0.63.

What our community says:
CAPS All-Stars are solidly backing the stock with 98% awarding it an "outperform" rating. The community at large agrees with the All-Stars with 94.6% assigning it a rating of "outperform." Fools are keen on Dril-Quip, though the message boards have been quiet lately with only 93 posts in the past 30 days. Even with a robust four out of five stars, Dril-Quip's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Dril-Quip's income has fallen year over year by an average of 6.9%. A year-over-year revenue decrease last quarter snaps a streak of three consecutive quarters of revenue increases.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q1	Q4	Q3	Q2
Gross Margin	41.8%	42.2%	43.3%	44.0%
Operating Margin	22.2%	19.1%	26.9%	27.7%
Net Margin	15.7%	14.7%	19.7%	19.7%

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