Energy-focused engineering and construction company McDermott International (MDR) reported weaker-than-expected second-quarter earnings, hurt by lower sales.
Earnings per share, excluding the newly spun-off Babcock & Wilcox Co. (BWC) operations and transaction costs, came in at 35 cents, below the Zacks Consensus Estimate of 42 cents.
Following the Babcock & Wilcox separation McDermott now operates as a stand-alone engineering, construction and installation company, focused in the offshore oil and gas exploration and production market.
Year-Over-Year Comparisons
Compared with the year-ago period, McDermott’s adjusted earnings per share jumped 133.3% (from 15 cents to 35 cents), while adjusted operating income soared 84.3% (from $55.7 million to $102.7 million). The positive comparisons stem from improved project performance in its Middle East operations
Sales (after accounting for the past results of Babcock & Wilcox as discontinued operations) were down 22.6% to $645.1 million due to reduced level of activities in the Middle East and Asia Pacific regions.
Backlog
McDermott ended the quarter with a backlog of $4.3 billion, compared with a backlog of $4.7 billion in the previous-year period. However, backlog was up 1.8% sequentially, benefiting from $720 million in new bookings.
Balance Sheet
As of June 30, 2010, the company had cash on hand of $537.2 million and long-term debt (including current maturities) of $55.8 million, representing a debt-to-capitalization ratio of 3.7%.
Our Recommendation
McDermott shares are currently rated as Zacks #3 Rank ('Hold'), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. This is supported by our long-term Neutral recommendation.
MCDERMOTT INTL (MDR): Free Stock Analysis Report
Zacks Investment Research
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