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Could Guidance Change Affect TechnipFMC in 2017?

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Could Guidance Change Affect TechnipFMC in 2017? PART 1 OF 6

TechnipFMC: Management’s Views on 4Q17

Series highlights

TechnipFMC (FTI) is one of the top OFS (oilfield services and equipment) companies. In this series, we’ll be taking a look at TechnipFMC’s management guidance, value drivers, balance sheet, and free cash flow. Let’s start with management’s comments.

TechnipFMC: Management&#8217;s Views on 4Q17

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Management’s views on growth

Douglas Pferdehirt, TechnipFMC’s (FTI) CEO (chief executive officer), has pointed to short-cycle activities in North America, which could slow down in the rest of 2017. In the company’s 3Q17 earnings conference call, Pferdehirt commented, “In North America, unconventional resource development continues to lead short-cycle activity. The pace of improvement is likely to slow with our expectation of a more moderate rig count growth. We also anticipate reduced levels of hydraulic fracturing fleet reactivations, partially offset by higher levels of inspection, maintenance and repair work that is needed to support the larger install base.”

FTI’s outlook on the international market

Regarding the international market, Pferdehirt commented on the 3Q17 earnings call, “Our surface activity outside of North America has been resilient, and the pricing environment has stabilized. The Middle East, North Africa and the North Sea offer the best near-term activity outlook for our international surface business, and we are encouraged to see several longer-term projects moving forward in these regions.”

FTI makes up 0.07% of the SPDR S&P 500 ETF (SPY). SPY tracks the price and yield performance of the S&P 500 Index (SPX-INDEX), which has risen 14% since January 17, 2017. FTI stock has fallen 18% during the same period.

Will synergies affect TechnipFMC?

On January 16, 2017, TechnipFMC was created through the merger of Technip and FMC Technologies. For more information, be sure to read Market Realist’s Is FMC Technologies’ Merger with Technip Almost Complete? FTI’s management expects significant merger synergies from this transaction. Maryann Mannen, FTI’s CFO (chief financial officer), commented in the 3Q17 conference call, “We remain confident that we will achieve $200 million in run rate savings by the end of this year and the total of $400 million in run rate savings by the end of 2018. These actions will generate savings across the portfolio as shown in recent disclosures we have made highlighting the allocation and savings by reporting segment. The greatest impacts will be realized in our Subsea and Onshore/Offshore segment.”

Next, let’s look at TechnipFMC’s management guidance for revenue and earnings for 2017 and 2018.

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