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What Is FTI’s Management’s Outlook on Deepwater Projects?

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What does FTI’s management think?

FMC Technologies’ (FTI) management thinks that FTI’s Subsea segment could receive a number of project awards that will help to provide it with steady revenue and income.

In FTI’s 1Q16 conference call, John T. Gremp, the company’s chair and CEO, said, “Over the next 24 months, we see the potential for nearly 20 large projects to move forward. Some large projects are considered strategic and could be awarded this year. But there is a likelihood that even these projects could be pushed into 2017. And we still do not expect any projects in excess of $500 million to be sanction before the end of the year.”

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What FTI’s management expects for 2016

  • 2016 Subsea Technologies revenue of ~$3.6 billion, 20% lower compared to 2015, driven by backlog conversion into subsea service revenue
  • 2016 Subsea margins in the range of 11%–13% excluding charges
  • Surface Technologies revenue fall of ~25%–30% compared to 2015

Analysts’ targets for FTI

Wall Street analysts’ highest target for FTI is $47 in the next 12 months, while the lowest target is $21. The median target price for FTI, surveyed among sell-side analysts, is ~$32.5. FTI is currently trading at ~$27, implying a 22% upside at its median price.

Halliburton (HAL), FTI’s larger market capitalization peer in the oilfield equipment and services industry, received a ~$47 median target price. This, relative to its current price, implies a 7% upside. FTI makes up 0.8% of the Energy Select Sector SPDR ETF (XLE).

Next, we’ll discuss FTI’s revenue and earnings by segment.

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