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McDermott Misses Earnings, Beats Rev

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Engineering and construction firm McDermott International (MDR - Free Report) reported weak first-quarter 2013 profits, owing to operating losses in some regions and increased expenses. This was partially offset by stronger operating income in Asia Pacific region.

Earnings per share from continuing operations came in at 9 cents, behind the Zacks Consensus Estimate of 15 cents.

Moreover, the Texas-based engineering-to-project management service provider’s per share profit was significantly lower than 25 cents earned in the first quarter of 2012. The quarter’s result was negatively influenced by lesser asset utilization and project activity.

McDermott generated revenues of $807.5 million in the quarter, up 11.0% from the first quarter of 2012 and also ahead of our expectation of $733.0 million. Increased fabrication activity in the Atlantic region and better operations in the Middle East and Asia Pacific regions boosted the company’s results.

On a reported basis, McDermott registered operating income of $53.0 million (down 33.8% year over year) during the quarter. Total costs and expenses also increased 16.5% from the corresponding period last year to $750.3 million.


At the end of the first quarter of 2013, McDermott had a backlog of $5,298.0 million, compared with $5,806.6 million a year ago. As of Dec 31, 2012, the backlog was $5,067.2 million.

Balance Sheet

As of Mar 31, 2013, McDermott had cash/cash equivalents of $461.5 million and long-term debt (including current maturities) of approximately $101.2 million (representing a debt-to-capitalization ratio of approximately 4.9%).

Zacks Rank

McDermott currently retains a Zacks Rank #4 (Sell).

However, there are some other energy firms that offer value and are worth buying now. These include EPL Oil & Gas Inc. with a Zacks Rank #1 (Strong Buy), and McMoRan Exploration Co. and Stone Energy Corporation with a Zacks Rank #2 (Buy).

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