NEW YORK (
) -- It came as no surprise to learn that shares of oilfield services company
(CAM - Get Report)
was downgraded by analysts at
following the company's third-quarter earnings miss. What did surprise, however, was that the stock fell 15% in what I can only describe as an overreaction. While other agencies will likely follow UBS' pessimism, I believe Cameron now presents an opportunity for investors looking for exposure in the energy sector.
First, we have to realize that unlike other sectors, Cameron's revenue and gross margins are not the driving forces of this stock, which is the same case for rivals such as
National Oilwell Varco
. Yet, some of these points are cited as reasons for the near-term bearishness. What's really important to Cameron, and for that matter this entire sector, are the volume of orders received. I won't disagree that it's an "unpredictable" metric. Still, in that regard, Cameron is outperforming expectations.
Third quarter orders were up 32% year-over-year to more than $3 billion, helped (in part) by better-than-expected demand in OneSubsea, a joint venture formed by Cameron and
(SLB - Get Report)
which they own 60/40, respectively. Not only did OneSubsea generate more than $1 billion this quarter in orders, but it also means that Cameron's backlog, which now stands at more than $11 billion, jumped almost 50% from last year.
It doesn't escape me that these doubts being spewed about Cameron today are coming from some of the same people that had reservations about the OneSubsea's prospects. They essentially said that this joint venture, which closed in June, wouldn't work. But in actuality, it's starting to pay huge dividends for both companies, given that their combined capabilities in deepwater innovation and integration platform.
What's more, I don't believe Cameron's downgrade was justified from an operational perspective. While I did point out earlier that revenue performances are secondary to orders results, it's not as if Cameron stunk it up in that area. Total revenues were up 13% year-over-year to $2.5 billion. This is another area where OneSubsea is creating value as Cameron was able to sell 85 subsea pumping units.