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McDermott (MDR) Rallies More Than 14% on Bullish 2017 Outlook

Zacks Equity Research
Ranger Energy Services, Inc. (RNGR) shares have started gaining and might continue moving higher in the near term, as indicated by solid earnings estimate revisions.

Shares of McDermott International, Inc. MDR rallied around 14.3% to eventually close at $8.98 on Jan 24 after the company issued an upbeat guidance for full-year 2017.

McDermott anticipates to generate earnings per share between 60 cents and 63 cents as against the prior estimate of 53 cents. The company now expects the EBITDA to be in the range of $400-$410 million compared with the prior guidance (issued along with the third quarter results) of $395 million. The improved outlook compares favorably with the 2016 EBITDA of $293 million. The year-over -year increase and the upbeat view primarily comes on the back of strong project execution and cost efficiencies during the fourth quarter.

The energy services player — which counts Matrix Service Company MTRX and Superior Drilling Products, Inc. SDPI as its peers — now expects the operating margin between 10.7% and 10.9% for full-year 2017 versus the earlier forecast of 9.8%.

Additionally, McDermott expects the net income in the range of $170-$180 million as against the earlier forecast of $150 million. Further, the forecasted net income for the full year reflects a massive increase from the year ago reported figure of $89 million.

McDermott — which has a manageable debt ratio of 23% — now expects the gross debt of $540 million versus the prior guidance of $550 million. Meanwhile, the projected revenues of $3,000 million for 2017 remain in line with the prior estimate.

Further, the company also provided a preliminary guidance for 2018. It expects revenues in the range of $3,100-$3,300 million for 2018. The EPS is estimated to lie between 42 cents and 52 cents. However, the forecast does not include the effect of merger with Chicago Bridge & Iron Company N.V. CBI. The net income for 2018 is expected in the range of $120-$145 million. Additionally, the company is likely to have a capital expenditure of $100-$115 million in 2018.

In a separate release, McDermott announced that it has been awarded an engineering, procurement, construction and installation contract from Saudi Aramco. Per the deal, McDermott will supply 13 jackets for multiple offshore fields. The company plans to work on the project through the second half of 2018 and the contract will be reflected in the company’s first-quarter 2018 backlog. Notably, this is the fourth fast-tracked deal awarded to McDermott by Saudi Amarco within two years.

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Chicago Bridge & Iron Company N.V. (CBI) : Free Stock Analysis Report
 
Matrix Service Company (MTRX) : Free Stock Analysis Report
 
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Superior Drilling Products, Inc. (SDPI) : Free Stock Analysis Report
 
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