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McDermott International Q2 Loss Meets Estimate, Narrows Y/Y

Zacks Equity Research

Offshore oil and gas-focused engineering and construction firm, McDermott International (MDR) reported second-quarter adjusted loss per share of 17 cents from continuing operations, in line with the Zacks Consensus Estimate. However, the reported loss was narrower than the year-ago adjusted loss of 56 cents. The improvement is attributable to much lower operating expenses.

Mcdermott International, Inc - Earnings Surprise | FindTheBest

McDermott generated revenues of $476.1 million in the quarter, down 26.5% from the second quarter of 2013. The figure also failed to beat the Zacks Consensus Estimate of $650.0 million. Lower contribution from marine operations hampered the results.    

Total Expenses

Total costs and expenses decreased 43.8% to $444.7 million from the year-ago quarter.


At the end of the second quarter, McDermott had a backlog of $4,063.9 million, down from $5,090.9 million a year ago.

Balance Sheet

Capital expenditure for McDermott during the quarter was $117.1 million. As of Jun 30, 2014, McDermott had cash and cash equivalents of $764 million and long-term debt (including current maturities) of approximately $904.4 million (representing a debt-to-capitalization ratio of approximately 35.4%).

Zacks Rank & Other Picks

Incorporated in 1959, Houston, TX-based McDermott is a leading global engineering and construction firm that has a diversified product portfolio, specialty manufacturing and service capabilities, and proprietary technological expertise. Unlike other engineering and construction companies, McDermott is well entrenched in major offshore energy projects and is one of the few global contractors that can provide a complete array of services – from design to construction.

However, McDermott has historically used bolt-on acquisitions to plug holes in its product/service portfolio. The company may find it difficult to complete accretive transactions in the future, which could thwart its growth.

As a result, McDermott currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the same industry like Cameron International Corporation (CAM), Natural Gas Services Group Inc. (NGS) and Weatherford International plc (WFT). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on WFT
Read the Full Research Report on MDR
Read the Full Research Report on CAM
Read the Full Research Report on NGS

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