McDermott (MDR) Q4 Earnings Top On Solid Project Execution

McDermott International, Inc. (NYSE:MDR) reported earnings of 10 cents per share in fourth-quarter 2017, surpassing the Zacks Consensus Estimate of 3 cents. The better-than-expected results are mainly attributed to strong project execution, and increased marine and fabrication activities. Further, the bottom line also improved from the year-ago quarter’s earnings of 2 cents. Key projects which strengthened earnings in the quarter include Saudi Aramco LTA II Lump Sum, Saudi Aramco Marjan power system replacement, Inpex Ichthys and Saudi Aramco Safaniya Phase 5 projects.

McDermott generated revenues of about $718.1 million in the quarter, 11.9% higher than the prior-year quarter’s figure of $641.8 million. Increased activity in the Middle East drove revenues. However, the top line lagged the Zacks Consensus Estimate of $742 million.

McDermott International, Inc. Price, Consensus and EPS Surprise

McDermott International, Inc. Price, Consensus and EPS Surprise | McDermott International, Inc. Quote

Total Expenses

Total costs and expenses increased from $635.5 million in the year-ago quarter to about $664.2 million in the quarter under review. Full-year expenses also increased 6.7% compared with 2016 amid higher research and development costs along with increased cost of operations.

Backlog

As of Dec 31, McDermott had a backlog of $3.9 billion compared with $4.3 billion a year ago. While 87% of the total backlog is related to offshore operations, the remaining 13% pertains to subsea operations.

Balance Sheet

Capital expenditure for McDermott was about $22 million during the quarter compared with $31 million in the year-ago quarter. As of Dec 31, 2017, the company had cash and cash equivalents of $390.3 million and long-term debt of approximately $512.7 million. Its debt-to-capitalization ratio was about 22.3%.

2018 Guidance

The company reiterated its preliminary guidance issued on Jan 24. McDermott expects full-year revenues to lie within $3.1-$3.3 billion range. The company expects the EBITDA to be within the range of $340-$365 million. Net income is now anticipated to be approximately between $120 and $145 million. McDermott expects free cash flow to range within $195-$235 million. The EPS is estimated to lie between 42 cents and 52 cents.

Zacks Rank & Key Picks

Houston, TX-based McDermott is focused on the offshore oil and gas business. The company also provides project management and procurement services. It operates in most of the major offshore oil and gas producing regions under three main reporting segments: Asia Pacific, Americas and the Middle East. The company carries a Zacks Rank #3 (Hold).

A few better-ranked players from the broader energy space include Marathon Petroleum Corporation (NYSE:MPC) , ConocoPhillips (NYSE:COP) and Statoil (OL:STL) ASA (NYSE:STO) , each sporting a Zacks Rank# 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Marathon Petroleum reported an average positive earnings surprise of 182.62% in the trailing four quarters.

ConocoPhillips delivered an average positive earnings surprise of 144.45% in the last four quarters.

Statoil reported an average positive earnings surprise of 23.18% in the trailing four quarters.

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