FMC Technologies (FTI) is the leading provider of sophisticated sub-sea systems for deep-water drilling. Shares have more than doubled over the past year amid strong earnings growth (30%/year over five years) and market-share gains (now more than 40%). Blowout Q1 earnings and heavy-handed stock repurchases have further enhanced Wall Street's appetite for the stock.
All the same, Barron's Sandra Ward thinks shares are "priced for perfection -- and perfection probably isn't something you want to bet on in the stock market." Lehman's James Crandell agrees: "It's the most fully valued of any stock I cover." FTI fetches more than twice the premium of top oil-services company Schlumberger (SLB).
Citigroup oil services analyst Geoff Kieburtz says share prices assume continued 20% growth, yet FMC's rig capacity allows for just 9-10%. Another thing investors fail to realize is that 15% of its earnings are from non-core Food Tech and Airport Equipment units, which are being spun off this summer.
Other negatives include a "precipitous" drop in its customer satisfaction ranking, which saw it fall from ninth to 25th out of 32-odd companies. A recent failure of FMC-designed equipment at a BP (BP) dig was an embarrassment.
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According to Bespoke Research, FMC is the second-most overbought stock in the S&P Oil & Gas Equipment & Services ETF (XES). Still, most thread participants have a hard time seeing too many negatives in a red-hot industry.
Steve Patterson notes FMC tends to outperform: It has beaten expectations in each of the last four quarters.
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This article has 4 comments:
Pursley
From another blog somewhere in the universe:
“What goes parabolically up must come down at least a little”. A trend reversal is where money leaves one sector and rotates or moves into another sector. It looks as though a rotation out of oil and gas has began. There is some potential very big and smart long term money that will be moving back into tech. As the rising tide lifts all boats, well place tech companies like AAPL should see added upward fuel. What might fall hard is an oil services company called FMC Technologies (symbol: FTI) which has recently doubled in price with a current P/E unjustly way above its peers.. Read Barron’s article by Sandra Ward. She points out no fewer than five reasons why the stock may well fall like a mal-attached crane off the top of an oil rig. About eight years ago I first heard the term, “Priced to Perfection” referred to the larger market before one of the worst crashes most living people have seen . Ms Ward uses “priced to perfection” in regard to the price FTI is now trading at (if its not going up anymore….). As the smart money takes profits from FTI; those willing to short the stock may derive a healthy profit. The stock closed the week at $75.55. The author suggests that it might find support at its 50 day moving average which is $66. Of course always use caution when shorting a stock. Remember January when AAPL dropped from $202 to its low of 119? Lets look to FTI and see if it behaves in a similar way
FMC Technologies Senior Vice President Robert L. Potter exercises options for 25,600 shares
NEW YORK (AP) -- A senior vice president of FMC Technologies Inc. exercised options for 25,600 shares of common stock, according to two Securities and Exchange Commission filings on Friday.
In Form 4s filed with the SEC, Robert L. Potter reported he exercised the options Wednesday for $10 apiece and sold them all the same day for $81.52 to $82.46 apiece.
Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction.