Identifying Trends for Forum Energy Technologies



Forum Energy Technologies’ revenue growth by segments

In fiscal 4Q15, Forum Energy Technologies’ (FET) Production & Infrastructure segment was more resilient, with a 42% fall in revenue on a year-over-year basis. The company’s Drilling & Subsea segment was the worst performer, with a 62.6% fall. The following were the main factors that resulted in the revenue fall:

  • lower drilling and subsea capital equipment sales
  • lower demand for drilling and subsea consumable products
  • reduced pressure pumping equipment sales

In fiscal 2015, Forum Energy Technologies recorded total revenues of $1.1 million, 38% less than the $1.7 billion recorded in fiscal 2014. In comparison, Superior Energy Services (SPN), Forum Energy Technologies’ larger market-cap peer, recorded $2.8 billion in revenues in fiscal 2015, 39% lower than a year ago.

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Forum Energy Technologies’ operating and net income

Both of Forum Energy Technologies’ segments turned to an operating loss from fiscal 4Q14 to fiscal 4Q15. The worst affected was the Drilling & Subsea segment, where fiscal 4Q15 operating loss was $42 million compared to $46 million operating income in fiscal 4Q14.

In fiscal 4Q15, Forum Energy Technologies reported a net loss of ~$164 million compared to $46 million net income in fiscal 4Q14. In fiscal 4Q15, FET’s reported earnings were negatively impacted by the following:

  • $125 million pre-tax goodwill and intangible asset impairment charge
  • $43 million pre-tax inventory and working capital reserve

For fiscal 2015, FET’s reported net loss was $119 million compared to $174 million net income in fiscal 2014. Forum Energy Technologies is 0.1% of the iShares Russell 2000 Value ETF (IWN).

Identifying trends in FET’s value drivers

  • valves product line: Book-to-bill ratio in the valves product line started to increase in fiscal 4Q15. This product line benefits from exposure to the downstream and midstream industries.
  • lower revenue: Management expects 10%–15% lower fiscal 1Q16 revenue compared to fiscal 4Q15 due to lower energy prices and a lower upstream drilling budget.
  • cost savings: Improving manufacturing cycle times is expected to result in cost savings. However, high fixed costs may outweigh such cost reduction efforts.

Next, we’ll take a look at Forum Energy Technologies’ indebtedness.


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