FMC Technologies, Inc. (FTI) — FTI stock jumped 7.1% on Wednesday after the company missed Q4 expectations. The oilfield services capital equipment provider reported adjusted earnings per share of 46 cents versus a consensus estimate of 50 cents.
Following the announcement, S&P Capital IQ Equity Research lowered its 2016 earnings projection by 25 cents to $1.46 per share and initiated an estimate for 2017 of $1.38. Its analysts also lowered their 12-month price target for FTI stock by $2 to $40, but they reiterated their “Strong Buy” opinion. They said that while low oil prices are likely to hamper large projects in 2016, they should have less of an impact on FMC’s oil services business. They also noted the company’s below-average net debt-to-capital ratio of 6%.
FTI stock hit an all-time high above $63 in July 2014. Since then, the decimation of crude oil prices has cut into the earnings of virtually all oil and oil service companies. However, FMC has a superior management team, and the longer-term nature of deep-water drilling projects is likely to continue to attract orders, especially where projects have already been sanctioned.
Very high volume and Tuesday’s opening gap despite the earnings miss should draw savvy buyers to FTI stock. In fact, we have seen high buying volume for the past three days, and my proprietary indicator, the Collins-Bollinger Reversal (CBR), issued a buy signal two weeks ago.
On Tuesday, FTI stock penetrated its 50-day moving average to the upside and then pulled back. This was probably due to profit-taking and should be viewed as an excellent buying opportunity.
Buy FTI stock at $25 with a trading target of $30 for a potential gain of 20%. This is also an excellent stock for longer-term investors to purchase as a cornerstone holding in the oil services subsector.
