Summary:
Dril-Quip Inc. manufactures highly engineered offshore drilling and production equipment. The company reported stable third quarter result, which was overshadowed by lower than expected revenues. Dril-Quip's results are heavily leveraged with continued strength in the global deepwater drilling markets. However, the company remains exposed to highly volatile oil and gas sector fundamentals. We also remain concerned about company-specific risks, which include new product growth challenges and potential backlog losses. Additionally, any delay in the execution of contracts might also hinder the growth prospect of Dril-Quip. This is reflected in our Neutral recommendation on the stock with a target price of $81.00.

Overview:

Dril-Quip Inc. (DRQ) manufactures highly engineered offshore drilling and production equipment for deepwater severe-service applications and harsh environmental conditions. The company designs and manufactures subsea and surface wellheads, subsea and surface production trees, mudline hanger systems, specialty connectors, and associated pipe, drilling and production riser systems, wellhead connectors and diverters, which are used on offshore rig equipment. The company's products are used by major integrated, large independent and foreign national oil and gas companies in offshore areas throughout the world. Dril-Quip also provides installation and reconditioning services and rents tools for use in the installation and retrieval of its products.

Dril-Quip operates in two segments Product Group and Services Group. The Product Group generates revenue through equipment sales to independent and major exploration and production (E&P) companies and offshore drilling contractors. The Services Group provides field installation, product reconditioning, and rentals of running tools for installation and product retrieval. Service revenue generally correlates to revenue from product sales because increased product sales generate increased revenue from installation services and rental running tools.

Dril-Quip's manufacturing operations are vertically integrated, with the company performing forging, heat treatment, machining, fabrication, inspection, assemblage and testing at its own facilities. Geographically, the company divides its operations into three segments Western Hemisphere (approximately 54% of revenue), Eastern Hemisphere (30%) and the Asia-Pacific (16%).

Dril-Quip Inc (DRQ): Read the Full Research Report
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
DRIL-QUIP INC (DRQ): Free Stock Analysis Report
 
To read this article on Zacks.com click here.