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Why Did FMC Technologies’ 1Q16 Earnings Miss Estimates?

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FMC Technologies’ 1Q16 revenue

FMC Technologies (FTI) released its 1Q16 financial results on April 26, 2016. The company recorded total revenue of ~$1.2 billion in 1Q16, a fall of ~29% from $1.7 billion in 1Q15.

FMC Technologies’ revenue for the latest quarter fell mostly due to upstream companies’ lower drilling activity. A stronger US dollar also affected FTI’s 1Q16 revenue negatively.

Compared to 4Q15, FMC Technologies’ revenue fell 15.5%. In comparison, 1Q16 revenue for Dril-Quip (DRQ), FTI’s smaller market capitalization peer, fell 27% year-over-year. DRQ provides deepwater, harsh environment, and severe service applications for energy upstream companies.

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FMC Technologies’ 1Q16 earnings

FMC Technologies’ 1Q16 adjusted net earnings per share (or EPS) were $0.22. This fell short of consensus sell-side analysts’ EPS estimate by 26%. Operating losses in the company’s Surface Technologies and Energy Infrastructure segments, energy market weakness, and the crude oil price fall resulted in FTI’s earnings’ falling short of analysts’ estimates.

FTI’s adjusted earnings fell 65% in 1Q16 compared to 1Q15, when its adjusted earnings were $0.63. In the past 13 quarters, FTI’s adjusted earnings have beat analysts’ estimated earnings by 1.2%. FTI makes up 0.39% of the ProShares Ultra Oil & Gas ETF (DIG).

What affected FMC Technologies’ reported earnings in 1Q16?

In 1Q16, FTI’s reported net income was ~$19.8 million. This was ~87% lower compared to 1Q15’s $147.6 million. Year-over-year, FTI’s income fall reflects a lower rig count and lower exploration and drilling spending by upstream companies, driven by lower energy prices.

The company’s 1Q16 reported net income was reduced by $47.6 million worth of pre-tax impairment charges, restructuring and other severance charges, and inventory write-downs. Compared to 4Q15, when FMC Technologies reported net income of $56 million, its 1Q16 reported earnings fell further.

Next, let’s discuss FTI’s growth drivers.

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