Zacks Investment Research downgraded engineering and
construction firm McDermott International ( MDR ) to a Zacks Rank
#4 (Sell) on May 14.MCDERMOTT INTL (MDR): Free Stock Analysis
ReportMATRIX SERVICE (MTRX): Free Stock Analysis
ReportNATURAL GAS SVC (NGS): Free Stock Analysis
ReportPOWERSECURE INT (POWR): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment
Why the Downgrade?
On May 8, McDermott reported weak first-quarter 2013 profits,
owing to operating losses in some regions and increased expenses.
Earnings per share from continuing operations came in at 9 cents,
lagging the Zacks Consensus Estimate of 15 cents.
Moreover, the Texas-based engineering-to-project management
service provider's per share profit was significantly lower than 25
cents earned in the first quarter of 2012. The quarter's results
were negatively influenced by lesser asset utilization and project
In fact, McDermott delivered negative earnings surprises in 2 of
the last 4 quarters with an average miss of 13.15%.
McDermott derives its revenues from companies in the oil and gas
exploration and production industry, a highly volatile and cyclical
sector that is directly exposed to commodity prices. A potential
drop in oil and gas prices could curtail deepwater drilling and
dampen subsea equipment demand, adversely affecting bookings at
Additionally, 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 negatively impact its growth rate.
Other Stocks to Consider
Not all engineering firms in the energy sector are performing as
poorly as McDermott. The stocks of PowerSecure
International Inc. ( POWR ) and
Matrix Service Company ( MTRX ) with Zacks Rank
#2 (Buy) and Natural Gas Services Group Inc. ( NGS ) with Zacks Rank
#1 (Strong Buy) are worth considering.