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McDermott International, Inc.

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Despite the volatility in the  commodity pricing environment, McDermott International managed to broadly beat the earnings expectations in the first quarter on the back of excellent project execution and cost savings. It also updated its EPS view for the year which is sharply higher than the prior guidance and consensus. Among other positives, MDR's substantial order intake during the end of 2016 has added to its already robust backlog. What's more, the company boasts of a strong balance sheet on the back of disciplined cash management, and no near-term debt maturities. Still, with a considerable portion of MDR’s current backlog assosiated with offshore operations, it remains susceptible to the pricing weakness that has affected the offshore drilling industry as well as the energy sector at large. Consequently, until the external environment challenges subside, we see limited upside for MDR shares.


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