In this article, let's take a look at Cameron International Corp. (CAM, Financial), an $11.82 billion market cap company. Cameron is a leading international manufacturer of oil and gas blowout preventers, flow control valves, surface and subsea production systems and related oilfield services products.
Recent news
Schlumberger (SLB, Financial) plans to acquire Cameron in a cash-and-stock deal valued at about $12.71 billion. The deal is valued at $14.8 billion, offering "new growth opportunities by creating the industry's first complete drilling and production systems." Both companies together would create an oilfield equipment and service powerhouse. “We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger's reservoir and well technologies with Cameron's leadership in surface, drilling, processing and flow control technologies," Schlumberger Chairman and CEO Paal Kibsgaard said.
The deal will generate synergies for Schlumberger, and it is expected about $300 million in the first year and double that amount in the second year.
Earnings surprise
Cameron has a positive earnings surprises history, but in the last quarter, earnings per share decreased by 8% when compared to the second quarter one year before. They came in at $0.60, beating the estimate of $0.47. Further, its revenue declined 14% to $1.3 billion, reflecting a slowdown in all business lines. Due to cost reductions, gross profit increased 3% year over year, and gross profit margin rose to 34.2%.
Hedge funds
Although Ken Griffin has reduced his position by 2% in the second quarter of 2015, the guru is the major shareholder containing 3,930,560 shares valued at $205.8 million. More bearish were Jim Simons (Trades, Portfolio) and David Dreman (Trades, Portfolio), both of them sold out the stock.
Further, Mario Gabelli (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio) and Manning & Napier Advisors, Inc sold significant stakes in Cameron during the Q2. On the other side, Ray Dalio (Trades, Portfolio) held 76,465 shares, up by 494% in the quarter. But he was not the only one, Steven Cohen (Trades, Portfolio), and Pioneer Investments (Trades, Portfolio) upped their stake 19.83% and 1.11% respectively.
Final comment
In a previous article, we said that business between both companies is a major catalyst in the upcoming future. Not even a week has passed, and we have this type of news, which is great for investors because some analysts think that oil prices will not recover in the short term, hurting Cameron´s profit.
Shares in Cameron surged more than 40% in premarket session, but Schlumberger shares fell 0.9%. The stock price dropped by about 9% on a year-to-date basis, and it returned a negative 38% in the past 12 months.
Disclosure: Omar Venerio holds no position in any stocks mentioned
