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McDermott (MDR) Q1 Earnings Beat, Revenues Miss Estimates
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Offshore oil and gas-focused engineering and construction firm McDermott International Inc. reported earnings of 8 cents per share in first-quarter 2017, higher than the Zacks Consensus Estimate of 1 cent. The results were primarily driven by improvement in project executions which led to cost savings and better-than-expected closeouts. However, the bottom line deteriorated from the year-ago quarter’s earnings of 13 cents.
McDermott generated revenues of about $519.4 million in the quarter, lower than $729 million in the prior-year quarter. Further, the top line was below the Zacks Consensus Estimate of $666 million. The lower revenues are mainly attributed to the reduced activity on Ichthys LNG project.
Total Expenses
Total costs and expenses decreased 33.1% from $693 million in the year-ago quarter to about $463.4 million.
Backlog
At the end of the first quarter, McDermott had a backlog of $3,898.3 million compared with $3,841.3 million a year ago. While 85% of the total backlog is related to offshore operations with Saudi Aramco work accounting for about 69% of backlog, the remaining 15% pertains to subsea operations.
Balance Sheet
Capital expenditure for McDermott was about $62.8 million during the quarter as compared to 31.9 in the year-ago quarter. Capex was mainly driven by the strategic acquisition of the pipelay and construction vessel Ceona Amazon, offset by cash received from sale leaseback arrangement.
As of Mar 31, 2017, the company had cash and cash equivalents of $623.5 million and long-term debt of approximately $720.2 million. The debt-to-capitalization ratio of the company is about 30.8%.
McDermott International, Inc. Price, Consensus and EPS Surprise
The projected net income figure increased from $80 million to $120 million. The increased guidance is driven by improved closeouts and better project executions in the first quarter.
Further, estimated free cash flow has also increased by 74%. The expected improvement in cash flow is driven by operating income improvements and strong working capital management. Amazon sale leaseback arrangement which offset the acquisition cost is reflected in the increased projected adjusted free cash flow for 2017.
Zacks Rank & Key Picks
Incorporated in 1959, Houston, TX-based McDermott is solely focused on the offshore oil and gas business. The company also provides project management and procurement services. It operates in most of the major offshore oil and gas producing regions under three main reporting segments: Asia Pacific, Americas and Middle East. The company currently carries a Zacks Rank #3 (Hold).
Better-ranked players in the broader industry include Penn Virginia Corporation , Bellatrix Exploration Ltd and Cenovus Energy Inc. (CVE - Free Report) . All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Penn Virginia posted a positive average surprise of 36.67% in the last four quarters.
Bellatrix posted a positive average surprise of 58.54% in the last four quarters.
Cenovus posted a positive average surprise of 74.89% in the last four quarters.
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McDermott (MDR) Q1 Earnings Beat, Revenues Miss Estimates
Offshore oil and gas-focused engineering and construction firm McDermott International Inc. reported earnings of 8 cents per share in first-quarter 2017, higher than the Zacks Consensus Estimate of 1 cent. The results were primarily driven by improvement in project executions which led to cost savings and better-than-expected closeouts. However, the bottom line deteriorated from the year-ago quarter’s earnings of 13 cents.
McDermott generated revenues of about $519.4 million in the quarter, lower than $729 million in the prior-year quarter. Further, the top line was below the Zacks Consensus Estimate of $666 million. The lower revenues are mainly attributed to the reduced activity on Ichthys LNG project.
Total Expenses
Total costs and expenses decreased 33.1% from $693 million in the year-ago quarter to about $463.4 million.
Backlog
At the end of the first quarter, McDermott had a backlog of $3,898.3 million compared with $3,841.3 million a year ago. While 85% of the total backlog is related to offshore operations with Saudi Aramco work accounting for about 69% of backlog, the remaining 15% pertains to subsea operations.
Balance Sheet
Capital expenditure for McDermott was about $62.8 million during the quarter as compared to 31.9 in the year-ago quarter. Capex was mainly driven by the strategic acquisition of the pipelay and construction vessel Ceona Amazon, offset by cash received from sale leaseback arrangement.
As of Mar 31, 2017, the company had cash and cash equivalents of $623.5 million and long-term debt of approximately $720.2 million. The debt-to-capitalization ratio of the company is about 30.8%.
McDermott International, Inc. Price, Consensus and EPS Surprise
McDermott International, Inc. Price, Consensus and EPS Surprise | McDermott International, Inc. Quote
Updated 2017 Guidance
The projected net income figure increased from $80 million to $120 million. The increased guidance is driven by improved closeouts and better project executions in the first quarter.
Further, estimated free cash flow has also increased by 74%. The expected improvement in cash flow is driven by operating income improvements and strong working capital management. Amazon sale leaseback arrangement which offset the acquisition cost is reflected in the increased projected adjusted free cash flow for 2017.
Zacks Rank & Key Picks
Incorporated in 1959, Houston, TX-based McDermott is solely focused on the offshore oil and gas business. The company also provides project management and procurement services. It operates in most of the major offshore oil and gas producing regions under three main reporting segments: Asia Pacific, Americas and Middle East. The company currently carries a Zacks Rank #3 (Hold).
Better-ranked players in the broader industry include Penn Virginia Corporation , Bellatrix Exploration Ltd and Cenovus Energy Inc. (CVE - Free Report) . All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Penn Virginia posted a positive average surprise of 36.67% in the last four quarters.
Bellatrix posted a positive average surprise of 58.54% in the last four quarters.
Cenovus posted a positive average surprise of 74.89% in the last four quarters.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>