McDermott (MDR) Q1 Earnings Beat Estimates, Affirms Guidance

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McDermott International Inc. MDR recently reported earnings of 17 cents per share in first-quarter 2018, surpassing the Zacks Consensus Estimate of 16 cents. Further, the bottom line also improved from the year-ago quarter's earnings of 8 cents. The outperformance can primarily be attributed to solid operational execution.

Key projects that strengthened earnings in the quarter include Inpex Ichthys, Pemex Abkatun-A2, Saudi Aramco LTA II Lump Sum and Saudi Aramco Safaniya Phase 5.

McDermott generated revenues of about $607.8 million in the quarter, 17% higher than the prior-year quarter's figure of $519.4 million and also ahead of the Zacks Consensus Estimate of $591 million. Increased activity in the Middle East drove revenues.

McDermott International, Inc. Price, Consensus and EPS Surprise

McDermott International, Inc. Price, Consensus and EPS Surprise | McDermott International, Inc. Quote

Cost of operations increased from $428.6 million in the year-ago quarter to about $475.7 million in the quarter under review. While expenses in research and development decreased 4.8% year over year to $458 thousand in the first quarter of 2018, selling, general and administrative expenses rose 33.9% from the prior-year quarter to $48.9 million.


As of Mar 31, McDermott had a backlog of $3.4 billion compared with $3.9 billion a year ago. In the first quarter, the company took $321.2 million worth of orders, following which its book-to-bill ratio is 0.5x.

Balance Sheet

Capital expenditure for McDermott was about $18.4 million during the quarter, compared with almost $63 million in the year-ago quarter.  As of Mar 31, 2017, the company had cash and cash equivalents of $412.7 million and long-term debt of approximately $513 million. Its debt-to-capitalization ratio was about 21.8%.

2018 Guidance

The company reiterated its preliminary guidance issued on Jan 24. McDermott expects full-year revenues to lie within the $3.1-$3.3 billion range. The company expects EBITDA to be within the range of $340-$365 million. Capital expenditure is anticipated to be between $100 million and $115 million. Net income is now anticipated to be approximately within $120-$145 million. Also, McDermott expects free cash flow to range within $195-$235 million. EPS is estimated to lie between 42 cents and 52 cents.

Moreover, the company's plan to combine its operations with that of Chicago Bridge & Iron Company N.V. CBI, which is expected to be executed in the coming month, is likely to bring an integrated technology and engineering expertise, along with a cost-effective delivery structure. The deal is expected to create significant value for the investors.

Price Performance

McDermott has lost 7.5% in the first quarter compared with 9.6% fall of its industry .

Zacks Rank and Stocks to Consider

McDermott has a Zacks Rank #3 (Hold).

If you are interested in the energy sector, you can opt for some better-ranked stocks like EOG Resources, Inc. EOG , Oasis Midstream Partners LP OMP and CNOOC Ltd. CEO . While EOG Resources and Oasis Midstream sport a Zacks Rank #1 (Strong Buy), CNOOC has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Houston, TX-based EOG Resources is an upstream energy company. For 2018, the bottom line of the company is likely to be up 34.1%. In the last four reported quarters, the company witnessed a positive average surprise of 25.7%.

Houston, TX-based Oasis Midstream is an integrated energy partnership. Its revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its bottom line is expected to increase 337.2%.

Hong Kong-based CNOOC is an integrated energy company. Its revenues for 2018 are anticipated to improve 49% year over year, while its bottom line is expected to increase 82.8%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: CEO , MDR , EOG , OMP

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