TechnipFMC's stock has remained somewhat flat since the merger of TechnipFMC and FMC Technologies in early 2017. Revenue has risen slightly by around 7% Q-o-Q while profit has declined by 25% Q-o-Q. Total order backlog has declined from $15.2 billion to $13.9 billion Q-o-Q. Oilfield services and equipment businesses such as TechnipFMC are closely linked to global rig-count and drilling/production activities. Rig count in general is expected to grow at a modest pace in 2018.
Management has also provided a slightly lower guidance for the year 2018 than what was achieved in 2017. Additionally, the company has initiated a share buyback program for $500 million. While overall profits have decreased, analysts do not expect any significant improvement in business conditions in 2018. Most analysts have recommended a hold rating on the stock.
TechnipFMC FMC's valuation seems to be on the lower side, trading at a P/E ratio of 21x when compared to Schlumberger 's 45x and National Oilwell Varco 's 30x (NTM). The energy sector's industry average is about 18x. We estimate the fair value at $26. The stock is indirectly dependent on oil and gas prices, which are expected to remain in the range of $50-$60. Overall, the company's success depends on projects being sanctioned across the world as well as the company's ability to successfully bid for those projects.
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