Personal Finance

Why McDermott International Stock Is Getting Slammed Today

Storage tanks under construction.

What happened

Shares of McDermott International (NYSE: MDR) tumbled nearly 25% by 10:30 a.m. EST on Wednesday after the engineering and construction company disclosed that it experienced some cost overruns while constructing the Cameron LNG project in Louisiana.

So what

McDermott and its 50-50 joint venture partner Chiyoda Corporation recently reassessed their progress on the construction of the Cameron LNG project. As a result of that assessment, McDermott said that it expects to report a charge of $168 million during the fourth quarter due to unfavorable labor productivity, increases in subcontracts, and commissioning and construction management costs. The company noted that the charge would negatively impact its fourth-quarter and full-year results for 2018.

Storage tanks under construction.

Image source: Getty Images.

The charge isn't the first one by the company, as cost overruns have hampered it in recent years. In the third quarter , for example, the company recorded $744 million in charges after three projects didn't perform as well as expected. While the company noted at its recent investors' day that those projects were outliers and that the rest were progressing as planned, the charge on Cameron LNG suggests otherwise.

Now what

McDermott can't seem to get a handle on what it will cost to build the large-scale energy projects it constructs for customers. Because of that, the company's stock has been under significant pressure in recent months. That volatility will likely continue until the company proves it can complete projects on budget.

10 stocks we like better than McDermott International

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and McDermott International wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of January 31, 2019

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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


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

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More