McDermott Meets EPS, Beats Revenue - Analyst Blog
11 Mai 2011 - 12:15PM
Zacks
Energy-focused engineering and
construction company McDermott International (MDR)
reported bright first quarter 2011 earnings, aided by higher sales
and strong backlog.
The company reported earnings per
share (EPS) of 29 cents in the quarter, at par with the Zacks
Consensus Estimate and up 31.8% from 22 cents in the prior-year
quarter.
McDermott generated revenues of
$899.2 million in the quarter, up a whopping 78% from first quarter
2010 and way ahead of our expectation of $758 million. The
quarterly performance was buoyed by strong contributions from the
Asia Pacific and Middle East segments (attributable to increased
marine activity on large engineering, procurement, construction and
installation or EPCI projects).
During the quarter, the company’s
operating income leaped 37.0% year over year to $100.3 million, on
the back of a strong Middle East business unit.
Backlog
At the end of the quarter,
McDermott had a backlog of $4.8 billion, compared with $4.1 billion
in the prior year. As of December 31, 2010, backlog was $5.0
billion.
Balance Sheet
As of March 31, 2011, the company
had $209.2 million cash on hand and long-term debt (including
current maturities) of $65.1 million, representing a
debt-to-capitalization ratio of 3.9%.
Our
Recommendation
We believe that Houston,
Texas-based McDermott will reap benefits of the strong industry
fundamentals through 2011 and beyond, given its geographic
footprint in high-growth regions, as well as its technology
leadership and efficient execution skills. The order flow and
backlog for the company’s products and services are expected to
remain healthy and trend higher in the near-to-medium term.
However, following The
Babcock & Wilcox Company (BWC) spin off, McDermott has
transformed into a less diversified concern with a greater business
risk profile. Moreover, the company remains exposed to the highly
volatile oil and gas fundamentals and commodity price fluctuations.
Hence, we see limited upside potential for the stock and maintain
our long-term Neutral recommendation.
BABCOCK&WILCOX (BWC): Free Stock Analysis Report
MCDERMOTT INTL (MDR): Free Stock Analysis Report
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