Cameron International Corporation's Earnings Leave Cause for Concern in 2015

Falling oil prices didn't impact oil and gas equipment and services providerCameron International Corporation last quarter, or so it appears based on the just-released fourth-quarter earnings report.

While revenue missed very slightly, earnings per share from continuing operations (meaning adjusted for one-time item) beat the analyst projection by 11%. Cash from operations climbed almost 50% in the quarter, and the $1.2 billion operational cash flow for the full year was a record level. Even with the strong cash-generating results, the stock is still well off its high in September 2014:

^SPX data by YCharts

Let's take a closer look at the earnings numbers. Cameron management continues to do a solid job, but 2015 looks uncertain right now.

Operational improvementsCameron International has made some big changes in its business, including selling off its compression business toGeneral ElectricandIngersoll-Randin 2014, after the game-changing formation of OneSubsea in 2013 withSchlumberger.

While recasting its business into new operating segments had a small negative impact on costs last quarter, management expects this leaner and more refined operation will lead to reduced operational expenses going forward. That's a positive, especially as the oil industry deals with a serious oversupply problem.

Uncertainty heading into 2015Cameron's business is based on supplying equipment to oil and gas producers, both on- and offshore, and too much drilling activity is happening right now -- which is not ideal in a low oil price environment. While plenty of people are pointing fingers at OPEC, the situation is largely due toU.S. oil production growth over the past few years -- American oil production growth since 2011 is the equivalent of Iraq, Kuwait, or Mexico'sentireannual production.

Cameron International benefited significantly fromthat growth, which sent the stock up more than 130% from mid-2010 through mid-2014:

^SPX data by YCharts.

However, capital expenditures for new production are expected to fall significantly in 2015. While Cameron has a solid backlog, the backlog is already declining. As CEO Jack Moore stated in the company's earnings release:

The key here is that only a portion of the company's business shows up in its backlog, and a meaningful portion comes from shorter-cycle business such as replacement parts for the equipment that Cameron makes and sells.

Looking aheadIn the long term, Cameron is probably in a pretty good position, but questions regarding oil and gas production growth in the short-term creates significant uncertainty. While this uncertainty plays out, Cameron's management is focusing on costs and efficiency, while also spending excess cash to repurchase shares while they are beaten down. Since 2010, the company has bought up more than 16% of its shares.

I like the company and what management is doing, but it's probably a good idea to see how the production story plays out over the next quarter before investing in Cameron. The headwinds in the short term cloud the long-term outlook, so even with the stock well off the 2014 high, the time might not be right yet for picking up this stock.

The article Cameron International Corporation's Earnings Leave Cause for Concern in 2015 originally appeared on Fool.com.

Jason Hall has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.