UPDATE 3-Lufkin sees margin improvements at key units

Thu Feb 9, 2012 12:38pm EST

* Q4 adj EPS $0.80 vs est. $0.76/shr

* Q4 rev rose 44 pct to $279.3 mln

* Sees Q1 EPS $0.50-$0.60 vs est $0.93/shr

* Sees FY12 EPS $3.90-$4.20 vs est $4.30/shr

By Durba Ghosh

Feb 9 (Reuters) - Lufkin Industries Inc, which forecast a weak first quarter, said it expects gross profit margins at its key units to pick up in the latter quarters of the year, as pricing pressure eases and manufacturing performance improves.

The company's shares, which fell as much as 5 percent in early morning trade on Thursday on the New York Stock Exchange, reversed course to gain 2 percent later in the day.

"We expect to see measured sequential pricing traction during the course of 2012 for the oil and gas segment," Chief Executive John Glick said on a conference call with analysts.

Lufkin, which has been plagued by material shortages at its U.S. factories, also said it now sees improvements in output at its manufacturing facilities.

For the full year, Lufkin forecast a per-share profit of $3.90 to $4.20, on revenue of $1.20 billion to $1.25 billion.

Analysts were expecting a profit of $4.30 per share, on revenue of $1.24 billion, according to Thomson Reuters I/B/E/S.

Global Hunter Securities analyst Brian Uhlmer however said the company will have to have a sizable recovery in the second half of the year inorder to meet its outlook.

"It is going to be tough for investors to truly believe that they are going to be able to execute and meet the guidance range," Uhlmer told Reuters.

The company said it expects gross profit margins at the oilfield division, its breadwinner, to rise to 29 percent to 30 percent in 2012, barring the first quarter. Fourth-quarter margins at the unit were 24 percent.

Lufkin said gross profit margins at its power transmission unit will improve to 30 percent to 31 percent by the end of the year. Quarterly margins at the unit were 28.5 percent.

Lufkin however said it expects a weak first quarter on sequentially lower purchases.

Fourth-quarter earnings were helped by strong demand for its artificial lift products -- used to improve production from a well -- particularly in North America.

For the fourth quarter, Lufkin earned 80 cents per share on an adjusted basis, versus analysts' estimates of 76 cents. Revenue rose 44 percent to $279.3 million, topping expectations of $255.33 million.

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