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Dril-Quip, Inc. (DRQ) manufactures highly engineered offshore drilling and production equipment for deepwater severe-service applications and harsh environmental conditions.
Dril-Quip's third-quarter 2008 results came on the weaker side, hurt by Hurricane Ike, which disrupted its manufacturing and delivery operations in September. In the third quarter, earnings came in at $0.69 per diluted share (our estimate was $0.72 per diluted share), compared to $0.67 per diluted share in the prior-year period. Profit for the period fell to $27.4 million as against $27.6 million in the year-ago quarter though earnings per diluted share rose marginally due to fewer shares outstanding.
However, the company's revenue edged up by 1.4% to $132.3 million, while order backlog at the end of the third quarter was about $528 million, a 16% year-over-year increase. Dril-Quip also completed its $100 million share buyback program during the period.
Overall, the company continues to enjoy strong demand for its products and services. Our Hold recommendation remains unchanged as we continue to believe that current valuation adequately reflects Dril-Quip's growth prospects, which leaves little room for upside from current levels.
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