(MDR - Analyst Report
the Zacks Consensus Estimate and is now benefiting from the "post earnings drift" higher. The stock is a Zacks Rank #1
(Strong Buy) and today it is the Bull of the Day.
MDR beat the Zacks Consensus Estimate of $0.01 by $0.12 for a
1200% positive earnings surprise. The topline was equally as
strong with the company reporting revenues of $729M and that
was $59M more than expected for a 8.7% positive revenue
McDermott International is an oil and gas services company that provides engineering, procurement, construction and installation for upstream field developments. McDermott International was founded in 1923 and is headquartered in Houston, Texas.
Over the last six quarters that I have data for, I see the
company topped the Zacks Consensus Estimate six times. These
were not small beats either, going back to March 2015 we saw a
75% positive earnings surprise and that was the smallest one! There was a 400% and a 280% positive earnings surprise over the last four quarters, so there are some big beats here.
On the topline there are a couple instances of dramatic out performance, like the June 2015 quarter that saw a $167M beat for a 22% positive revenue surprise. The December 2015 quarter saw a miss of nearly $100M for a 13% negative revenue surprise, but that came as oil prices were dropping like a stone.
We have seen a recent kick higher to $0.05, but the real story there is that 2016 is expected to be a positive earnings year and not a year of red ink. The Zacks Consensus Estimate was calling for a loss of 3 cents in April, but following the huge beat, analysts moved their forecast up 8 cents.
The 2017 Zacks Consensus Estimate probably doesn't have that much visibility to it. The number has been $0.00, give or take a penny over the last four months. That said, the number is prone to move as there were 2 months projecting a loss and 2 months calling for a gain.
The valuation is a little stiff for MDR. 98x forward PE is a
huge, so let's focus on trailing PE for this stock. The 12.6x trailing number is much more palatable, especially when compared to the 19x industry average. The 0.8x price to book multiple should get value investors salivating even if the industry average is 1.3x. That multiple has a history of moving around, with a high of 3.7x in 2011 and as low as 0.35x in 2015.
Zacks has developed a chart that helps investors see how
earnings estimates have
the price of the stock over the last several years. We call
this chart the
consensus chart, and each color coded lines represents
analyst estimates over a
designated year. As estimates increase, the stock tends to
follow. The Zacks
impacted by earnings estimate increases, beats and
incorporates the idea of
agreement and magnitude. As a
Zacks Rank #1 (Strong Buy) we see that estimates are moving
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