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Cameron International: Why All Segments Reported Lower Q4 Revenue

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Cameron International’s performance by segment

From fiscal 4Q14 to 4Q15, all of Cameron International’s (CAM) segments recorded lower revenues. The Valves and Measurement segment suffered the biggest revenue decline with a 31% fall. The Subsea segment was the most resilient with a 19% fall.

CAM’s Valves and Measurement segment recorded a 63% decline in operating income. This decrease was due mostly to lower volumes and pricing pressure for CAM’s products and services. On the other hand, CAM’s Subsea segment saw an 85% operating income increase during the same period. This increase is likely due to improved project execution and a higher share of better-margin service work.

Core Laboratories (CLB), CAM’s peer, reported 4Q15 adjusted operating income that fell 57% from 4Q14. CLB’s market capitalization stands at $4.4 billion versus CAM’s $12.5 billion.

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What hurt CAM’s fiscal 4Q15 performance?

  • lower onshore drilling activity in North America for the Surface segment
  • lower project-related backlog and reduction in service activity in the Drilling segment
  • lower volumes and pricing pressures in the Valves & Measurement segment

Strong project execution and a higher share of better-margin services in the Subsea segment partially mitigated these negative factors. CAM’s backlog stood at $6.6 billion by the end of fiscal 2015, down 31% from $9.5 billion at the end of fiscal 2014.

Cameron International is 1.0% of the Vanguard Energy ETF (VDE).

Cameron International’s CEO shares a warning

Cameron International CEO Scott Rowe warned about energy price weakness and its effects in fiscal 2016. In the company’s fiscal 4Q15 press release, he said, “Although declines in energy prices will have a negative impact on our business in 2016, we remain focused on the factors that will drive our fundamental long-term performance: execution, customer relationships, cost reduction and technology.”

Next, we’ll discuss Cameron International’s returns.

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