Like a junior high school dance, a lot of players in the energy space are hanging back and waiting for others to start the action. Nobody seems to doubt that there is going to be another wave of energy development projects and rig-building, but there seems to be some reluctance on the part of the major players to make a move. This could be good news for investors thinking about taking a position in Cameron (NYSE:CAM).
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The Quarter that Was
Cameron got a lot of the wrong kind of publicity during the BP (NYSE:BP) oil spill debacle (the company provided the blowout preventer), but the drilling moratorium did not significantly hurt the company's third-quarter business. Revenue rose 24% from the year-ago level, and net income increased by 19%. EBITDA was a little less impressive, climbing 19% on a year-over-year basis.

Although the company surpassed estimates by a small margin, there was more positive news in the order book. Orders were up 10%, and the book-to-bill for the quarter was just a bit under 1.0. The company's backlog is also quite considerable, standing at nearly $5 billion exiting the quarter. Although this represents an increase in backlog on a sequential basis, year-over-year figures were reduced.

The Road Ahead
There seem to be some solid reasons for optimism in the energy equipment sector. Seadrill (Nasdaq:SDRL) and Atwood (NYSE:ATW) recently announced new build orders for drilling rigs. Now, while National Oilwell Varco (NYSE:NOV) is likely to see more direct benefit from new rig builds than Cameron or other equipment companies like FMC Technologies (NYSE:FTI) (though Cameron is active in areas like riser systems and manifolds), an overall increase in activity will be good news. What's more, Cameron has been working to broaden its portfolio, including its exposure to onshore shale plays.

Ultimately, it is likely to be offshore projects that will drive investor interest in Cameron. CAM has a significant share of the market for blowout preventers and other segments of the oil and gas business.

The Bottom Line
Considering the billions of dollars that Petrobras (NYSE:PBR) and Shell (NYSE:RDS.A) are going to spend on offshore development in Brazil's waters alone, it seems probable that there is going to be a huge amount of business to go around in the coming years - particularly in the subsea business that is so important to Cameron. That is the good news.

Unfortunately for value hounds, Cameron is not dirt-cheap, particularly in comparison to the larger NOV. Still, these stocks often look expensive before big ramps in business activity. What's more, multiples have a way of expanding when investors are caught up in the enthusiasm of expanding project activity. Cameron is not the safest stock around, but investors may want to consider this pick-and-shovel play on expanding energy exploration and production activity. (Before jumping into this hot sector, learn how these companies make their money. Read Oil And Gas Industry Primer.)

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Tickers in this Article: CAM, NOV, FTI, PBR, RDS-A, SDRL, ATW

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