McDermott Tops Profit Ests, Down Y-Y - Analyst Blog

Energy-focused engineering and construction firm McDermott International (MDR) reported better-than-expected first quarter 2012 earnings on the back of lower costs. Earnings per share from continuing operations came in at 25 cents, significantly above the Zacks Consensus Estimate of 16 cents.

However, the Texas-based engineering-to-project management service provider’s per share profits came slightly lower than the first quarter 2011 level of 29 cents amid depressed marine activity in the Asia Pacific unit and a dip in fabrication man-hours. These factors were partially offset by improvement in the domestic fabrication activity.

McDermott generated revenues of $727.7 million in the quarter, down 19.1% from the first quarter 2011 and failed to meet our estimate of $842.0 million.

The company’s operating income was $80.2 million (down 20.1% year over year) in the quarter, while total costs and expenses fell 19.8% from the corresponding period last year to $643.8 million.

Backlog

At the end of the first quarter, McDermott had a backlog of $5,806.6 million, compared with $4,764.0 million a year ago. As of December 31, 2011, backlog was $3,881.1 million.

Balance Sheet

As of March 31, 2012, McDermott had cash/cash equivalents of $789.0 million and long-term debt (including current maturities) of approximately $92.2 million (representing a debt-to-capitalization ratio of approximately 4.9%).

About the Company

McDermott, which currently retains a Zacks #5 Rank (short-term Strong Sell rating), primarily serves the worldwide offshore oil and gas field developments, including front-end design and detailed engineering, fabrication and installation of offshore drilling and production facilities, as well as installation of marine pipelines and subsea production systems.

Additionally, the company provides project management and procurement services. It operates in most major offshore oil and gas producing regions, including the U.S., Mexico, Canada, the Middle East, India, the Caspian Sea and Asia Pacific.

In August 2010, McDermott completed the spin-off of its ‘Power Generation Systems’ and ‘Government Operations’ segments into a separate, independent and publicly traded company The Babcock & Wilcox Co. (BWC).

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