Shares of Technip FMC (FTI -0.19%), a major provider of subsea services to the energy industry, jumped as much as 10% on April 28. By 2:30 p.m. EDT, the stock had fallen back to a roughly 8.5% gain, but it was clear that investors found the company's after-the-close earnings report on April 27 fairly pleasing.
Technip FMC's largest business is its subsea division (85% of first-quarter revenues), which provides underwater products and services to offshore energy installations. Revenues in this group rose 10.6% year over year in the first quarter of 2021. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were higher by nearly 29%. And the division shifted from a loss to a profit.
Meanwhile, the backlog was lower year over year, but there was a nearly 30% increase in inbound orders. The company's book-to-bill ratio was 1.1, meaning Technip FMC brought in slightly more work than it completed. These pretty solid results suggest that the company's performance is on the mend. It's not surprising that investors were upbeat after reading the news. The company also noted that it was working on partnerships in the offshore wind farm space, which hits on the hot theme of renewable power.
That said, there were still some negatives to consider. The company's surface division makes up the rest of its business, and results weren't particularly great. For example, weak onshore U.S. drilling activity was a key driver of a 25% year-over-year segment-level revenue decline. Adjusted EBITDA was positive, partly thanks to cost-cutting efforts, and net income was positive though inbound orders were weak. All in all, the news here clearly wasn't as positive for the smaller of the company's two divisions. But given the strength of the larger subsea operations, it appears that investors were willing to overlook this discrepancy.
Technip FMC appears to be highlighting some green shoots in its core business, and investors were excited to read the news. Looking at the big picture, meanwhile, the company's $0.03 per share loss beat Wall Street consensus estimates by $0.04, something investors usually like to see. While it would be difficult to call this a great quarter, there were plenty of reasons for investors to be upbeat today. It's also worth noting that this is the first earnings report since the company's partial spin-off of its Technip Energies division in mid-February, so it represented a fairly solid start for the company in its new form.