A month has gone by since the last earnings report for McDermott International, Inc. . Shares have lost about 6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First-Quarter 2017 Results
McDermott reported earnings of $0.08 per share in first-quarter 2017, higher than the Zacks Consensus Estimate of $0.01. 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 $0.13.
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%.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted upward by 18.9% due to these changes.
VGM Scores
At this time, McDermott's stock has a subpar Growth Score of 'D', however its Momentum is doing a bit better with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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McDermott (MDR) Down 6% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for McDermott International, Inc. . Shares have lost about 6% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
First-Quarter 2017 Results
McDermott reported earnings of $0.08 per share in first-quarter 2017, higher than the Zacks Consensus Estimate of $0.01. 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 $0.13.
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%.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted upward by 18.9% due to these changes.
McDermott International, Inc. Price and Consensus
McDermott International, Inc. Price and Consensus | McDermott International, Inc. Quote
VGM Scores
At this time, McDermott's stock has a subpar Growth Score of 'D', however its Momentum is doing a bit better with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.