Fti Submersible
Image: FMC Technologies.

Investors in energy companies throughout the industry have had to deal with the impact of falling oil prices for nearly a year now, and second-order effects have cascaded down to many of the oil services companies that provide support to exploration and production companies. For FMC Technologies (NYSE:FTI), oil's poor performance has been a major concern, and coming into Tuesday afternoon's second-quarter financial report, FMC investors were already bracing for double-digit percentage declines in revenue and net income because of the collateral damage to its customers. Unfortunately, FMC wasn't able to live up to even those lowered expectations, with results that raised some questions among those following the stock. Let's look more closely at FMC's latest results and what could lie ahead for the company.

The challenge FMC Technologies faces
The headline numbers in FMC Technologies' second-quarter report weren't very appealing. Revenue fell 15% to $1.695 billion, falling short of the $1.71 billion that investors had wanted to see from the company. Net income got cut by more than half, and earnings of $0.46 per share were down a half-dollar from last year's second quarter and missed consensus expectations by $0.15 per share. Even after adjusting for about $0.06 per share in restructuring and tax charges, FMC Technologies fell short of what investors had hoped to see.

FMC's segments show where the company has felt the biggest impact of the oil bust. The Subsea Technologies unit saw sales drop 7%, but all of those declines were due to currency impacts. If you adjust for the strength of the U.S. dollar, FMC's subsea sales actually climbed roughly 5%. Similar currency effects held back growth in operating profit as well. Yet the Surface Technologies business took a much bigger hit, with a 29% drop in revenue leading to a plunge of nearly two-thirds in the segment's operating profits for the quarter. Similarly, the Energy Infrastructure unit saw revenue fall by a third and suffered a worse than 70% decline in operating profits.

Similar trends show up in FMC's inbound order activity figures. The Subsea arena saw sizable gains of almost 20%, but Surface Technologies posted a 40% drop, resulting in an overall companywide decline of around 2%. Order backlogs, however, have started to dry up, with big declines throughout company adding up to a $2 billion drop year-over-year to $5.32 billion.

CEO John Gremp drew the distinction between the healthy subsea segment and the ailing surface business. "We have increased confidence of exceeding $3 billion of subsea awards this year," Gremp said, and "we maintain our expectation of delivering Subsea Technologies margins of approximately 15% for the full year." The CEO also remains confident about the company's long-term future, noting that FMC "continues to take actions to change our business model and improve our operating effectiveness to address current market conditions."

Can FMC Technologies recover?
In many ways, it's surprising just how successful FMC Technologies has been with its subsea unit. With costs of production for deepwater operations often being much higher than for land-based projects, many feared that deepwater spending would evaporate and leave FMC high and dry. At least so far, though, FMC has done a great job of retaining its relationships with its customers, and that has kept the damage from being even more severe than it has been.

In addition, FMC remains confident about the long-term prospects for its stock price. The company used its stock repurchase program to buy back about 1.5 million shares of stock during the quarter, spending an average of $41.62 per share. With net debt of around $700 million, some might query whether buybacks are a good idea in the current industry environment. Yet spending between $60 million and $65 million to repurchase shares that had fallen by a third from their recent highs seems like a reasonable use of capital -- despite the subsequent further drop in the stock price.

Investors seemed largely nonplussed by the FMC Technologies report, with the stock climbing about half a percent in the first hour of after-market trading following the announcement. In the long run, what FMC needs is for oil prices to sustain an upward recovery from their plunge, and in the meantime, continuing to work with customers to ensure a steady stream of projects regardless of what oil prices do is the best strategy FMC Technologies can follow.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends FMC Technologies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.