April 16, 2008 / 8:11 PM / 10 years ago

UPDATE 2-Lufkin profit beats estimates; stock hits lifetime high

(Recasts, adds details, analysts comments, share movement)

By Shradhha Sharma

BANGALORE, April 16 (Reuters) - Lufkin Industries Inc LUFK.O posted a better-than-expected quarterly profit as the diversified manufacturer saw a rebound in bookings for its oil field equipment and power transmission business, sending its shares to their lifetime high.

The growth in bookings was primarily related to high energy demand, based on orders throughout its markets for high speed gears used in energy related businesses, Lufkin said in a statement.

“I think what the market took hold of is that the backlog was up very strong, which was a certainly a positive indication,” Raymond James analyst Colin Gerry said.

The company posted first-quarter earnings of $15.6 million, or $1.06 a share, compared with $17.8 million, or $1.17 a share, a year ago.

Lufkin had forecast first-quarter earnings of 90 cents to $1.00 a share.

The company said the results include a gain of 5 cents per share related to the run-out of inventories in its trailer products business.

Revenue fell marginally to $147 million for the quarter.

An analyst had expected Lufkin to earn $1.00 a share, before special items, on revenue of $137.03 million, according to Reuters Estimates.

“They had guided to quite a bit of seasonality and it appears that this quarter they were able to overcome it. The outlook still looks very strong, Gerry said.


Lufkin raised its earnings estimates for 2008 after its oil field and power transmission bookings backlog went up by about 14 percent to $235.7 million at the end of first quarter.

Lufkin said it now expects 2008 earnings of $5.10 to $5.30 a share, compared with $5.00 to $5.20 a share earlier.

The company also set second-quarter earnings target of $1.30 to $1.40 per share.

“It was a strong quarter and the visibility and strength of the backlog could indicate better results than management’s new guidance,” Raymond James analyst Gerry said.

Gerry added that Lufkin might be looking at acquisitions.

“They have built a pretty good cash balance, they have zero debt and over $100 million in cash,” he said. “I would think M&A activity is a little bit more on the front of their brain than it was in the past.


Lufkin’s first-quarter earnings would benefit the oil and gas equipment business of Dover Corp (DOV.N), which operates in the same markets as Lufkin, J.P. Morgan analyst Stephen Tusa said in a note.

Lufkin is also a customer of Dover.

“We believe that Lufkin’s strong backlog growth has positive read-through to Dover’s highly profitable Energy segment,” Tusa said in an e-mail response.

Dover is to report its first-quarter earnings on April 23.

Lufkin, whose other competitors include Weatherford International Ltd (WFT.N) and Wabash National Corp (WNC.N), manufactures and services equipment used to extract crude oil and other fluids from wells.

Lufkin shares were trading at about 13.84 times forward earnings, lagging the oil and gas equipment and services sector which is at a multiple of 29.54.

Shares of Lufkin closed up more than 13 percent at $77.19, after touching an alltime high of $77.77 in intra-day trade. (Editing by Gopakumar Warrier)

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