Energy-focused engineering and construction firm
) reported better-than-expected second quarter 2012 earnings
results, owing to strong contributions from certain regional
Earnings per share from continuing operations came in at 22 cents,
in-line with the Zacks Consensus Estimate.
However, the Texas-based engineering-to-project management service
provider's per share profit came lower than 28 cents earned in the
second quarter of 2011. The quarter's result was impacted by
depressing marine activity in the Asia-Pacific unit.
McDermott generated revenues of $889.2 million in the quarter, up
4.6% from the second quarter of 2011 and also exceeded our
expectation of $886.0 million. Better fabrication and marine
operations in the Middle East and Atlantic regions boosted the
On a reported basis, the company's operating income was $79.4
million (down 5.2% year over year) in the quarter, hurt by the
increase in total costs and expenses (up 5.6% from the
corresponding period last year to $807.2 million).
At the end of the second quarter of 2012, McDermott had a backlog
of $5,746.7 million, compared with $4,715.6 million a year ago. As
of March 31, 2011, backlog was $5,806.6 million.
As of June 30, 2012, McDermott had cash/cash equivalents of $644.1
million and long-term debt (including current maturities) of
approximately $109.8.million (representing a debt-to-capitalization
ratio of approximately 5.6%).
On the same day, one of the affiliates of McDermott won
transportation and installation services contract from
Williams Partners L.P.
) for the Spar Hull in the Gulf of Mexico. Although none of the
companies disclosed the financial terms of the deal, McDermott has
included the contract's value in its second quarter 2012 backlog.
Rating and Recommendation
We are maintaining our Neutral recommendation on McDermott
International. The company enjoys strong exposure to activities
across most of the rich resource acreages and has recently entered
into a number of deals that are expected to generate high returns.
However, the growth potential of McDermott will likely be
restricted by the volatile nature of the energy sector, expected
lower operating margin in 2012 and the clouded post-split outlook.
McDermott currently retains a Zacks #3 Rank (short-term Hold
MCDERMOTT INTL (MDR): Free Stock Analysis
WILLIAMS PTNRS (WPZ): Free Stock Analysis
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