McDermott Downgraded to Sell - Analyst Blog
08 April 2013 - 8:45PM
Zacks
Zacks Investment Research downgraded McDermott
International (MDR), an energy-focused engineering and
construction firm, to a Zacks Rank #4 (Sell) on Apr 6, 2013.
Why the Downgrade?
During the fourth-quarter 2013 earnings release, McDermott reported
total costs and expenses to be roughly $913.0 million, which
represents a significant increase of 17.1%, compared to the
year-ago period.
Besides that, McDermott derives its revenues from companies in the
oil and gas exploration and production (E&P) 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 subsea equipment demand, adversely affecting
bookings at McDermott.
Moreover, McDermott has hinted toward revenue of $3 billion in
2013, lower than the $3.6 billion in 2012, mainly due to
uncertainty around the timing of some of the company’s bigger
awards.
Additionally, McDermott foresees the large Papa Terra project in
Brazil to contribute to its earnings by late 2013 or start of 2014,
as against the previous assumption of an earlier timeframe, which
is reflected in the company’s expectation of negative long-term
sales growth rate of 16.6%.
The Zacks Consensus Estimate for first-quarter 2013 has decreased
20% to 16 cents per share over the last 60 days. For 2013, all the
estimates (10 out of 10) were revised downward over the last 60
days, sinking the Zacks Consensus Estimate by 15.9% to 74 cents per
share.
Stocks to Consider
Three firms in the energy sector that are expected to significantly
outperform the U.S. equity markets in the next one to three months
are Helmerich & Payne Inc (HP),
Calumet Specialty Products Partners LP (CLMT) and
Stone Energy Corp. (SGY). All three stocks carry a
Zacks Rank #1 (Strong Buy).
CALUMET SPECLTY (CLMT): Free Stock Analysis Report
HELMERICH&PAYNE (HP): Free Stock Analysis Report
MCDERMOTT INTL (MDR): Free Stock Analysis Report
STONE ENERGY CP (SGY): Free Stock Analysis Report
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