Please ensure Javascript is enabled for purposes of website accessibility

TechnipFMC Sees Its Slump Continue

By Dan Caplinger - Feb 21, 2018 at 5:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out what sent revenue falling for the energy services company during the quarter.

Companies that provide services to oil and gas exploration and production specialists have gotten hurt by weak crude oil prices, and TechnipFMC (FTI 4.27%) has been among those hit hard by the energy slump. Between its offshore and onshore services, TechnipFMC relies on constant strong levels of activity in order to drive its results, and the volatility in energy markets hasn't provided the stability that investors prefer to see.

Coming into Wednesday's fourth-quarter financial report, TechnipFMC investors wanted to see further signs of improvement after an encouraging report a few months ago. Instead, the company's numbers suggested a deteriorating recovery in energy, raising new concerns about the future. Let's look more closely at TechnipFMC and what it said about the industry.

Sensor array under ocean surface.

Image source: TechnipFMC.

TechnipFMC can't catch a break

TechnipFMC's fourth-quarter financial results weren't able to restore confidence in the company's immediate future. Revenue on a pro forma basis fell 16% to $3.68 billion, which was far below the $3.84 billion that most of those following the stock were expecting to see. GAAP (generally accepted accounting principles) losses widened by more than half from year-ago levels, and even after adjusting for one-time charges, adjusted earnings of $0.20 per share were less than half the consensus forecast among investors.

Adding insult to injury was the downward impact of tax reform on the company. TechnipFMC said that it had to take a charge of $138.2 million because of new tax laws, and that accounted for nearly all of the company's net loss on a GAAP basis.

As we've seen before, much of the decline in key metrics for TechnipFMC came from its subsea segment. Sales for the unit fell 36% on a pro forma basis, and operating profit fell by more than half from year-ago figures. Europe, Africa, and the Asia-Pacific region all saw reductions in project activity. Inbound orders of $1.72 billion helped raise segment backlogs slightly to $6.2 billion.

Elsewhere, TechnipFMC's performance was mixed. The onshore/offshore segment's top line fell 2%, but the unit reversed a year-earlier operating loss by posting a much more substantial operating profit. Inbound orders fell to $874 million, however, and backlog fell by almost $1.2 billion to $6.37 billion. Rising project activity offset the negative impact from the end of the first phase of a key liquefied natural gas project. The surface technologies unit did even better, with a 23% rise in pro forma revenue and a good-sized profit reversing a year-ago loss on an operating basis.

Can TechnipFMC bounce back?

CEO Doug Pferdehirt focused on the energy services company's strengths. "Our full year operational performance is a result of our relentless focus on project execution," Pferdehirt said, "and our commitment to delivering client success." The CEO said that its focus helped produce good results across all of its business segments.

TechnipFMC also tried to stay upbeat about its potential. Pferdehirt pointed to a key refinery expansion in Bahrain, increased rig counts in land-based North American shale plays, and more subsea projects helping to boost performance.

For 2018, TechnipFMC sees overall revenue coming in between $11.8 billion and $12.6 billion. Margins will be best in the surface technologies sector, where revenue should be between $1.5 billion and $1.6 billion. The biggest money-raiser will be onshore and offshore, with $5.3 billion to $5.7 billion in segment sales, but subsea will be just behind with guidance for $5 billion to $5.3 billion. The company upgraded its cost-savings estimates to $450 million annually by the end of 2019.

The energy sector remains volatile, and TechnipFMC will have to keep finding ways to overcome its challenges. Until conditions really improve, it'll be difficult for TechnipFMC to reach its full potential.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends TechnipFMC. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

TechnipFMC plc Stock Quote
TechnipFMC plc
$8.31 (4.27%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.