McDermott (MDR) Provides Q1 Operational Update, Stock Jumps

McDermott International, Inc. MDR recently provided encouraging first-quarter 2018 operational update, while reaffirming its guidance for the whole year. The company thanked solid backlog conversation in its operational areas along with successful execution of its cost-saving plans for the positives. Following the news, the stock jumped 6.7% in the last session.

The company expects its top line for the Jan-Mar quarter to be in the range of $600-$610 million, much higher than the year-ago figure of $519.4 million. The Zacks Consensus Estimate shows revenues to be $590.8 million. Moreover, McDermott expects its EPS for the quarter to be in the range of 10-12 cents.

Per McDermott, cost saving efforts like the Fit2Grow initiative played crucial roles in this quarter. The Fit2Grow initiative alone helped the company in generating $15 million in savings. Moreover, McDermott expects its operating margin in the quarter to be in the range of 10-10.7%.

The company — anticipated to report first-quarter earnings around Apr 24 — expects its total backlog in the quarter to be around $3.4 billion, slightly lower than the Zacks Consensus Estimate of $3.8 billion.

We note that the company delivered a positive average earnings surprise of 247.1% in the last four quarters, thrice beating the Zacks Consensus Estimate.

2018 Guidance

McDermott reaffirmed its preliminary 2018 guidance, issued on Feb 21. The Houston, TX-based service provider expects its full-year revenues to be in the range of $3.1-$3.3 billion. Moreover, the company anticipates its EBITDA to be within the $340-$365 million range. Additionally, net income is anticipated to be approximately between $120 and $145 million. The company foresees its free cash flow to range within $195-$235 million. The EPS is estimated to lie between 42 cents and 52 cents.

Price Performance

McDermott has gained 1.7% in the past year against 14% fall of its industry.

Zacks Rank and Stocks to Consider

McDermott has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are CNOOC Limited CEO, Oasis Midstream Partners LP OMP and Continental Resources, Inc. CLR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hong Kong-based CNOOC is an integrated energy company. Its revenues for 2018 are anticipated to improve 51.3% year over year, while its bottom line is expected to increase 80.8%.

Houston, TX-based Oasis Midstream is an integrated energy partnership. Its revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its bottom line is expected to increase 337.2%.

Oklahoma City, OK-based Continental Resources is an oil and gas exploration and production company. Its revenues for first-quarter 2018 are estimated to soar 55.7% from the year-ago quarter’s figure. For 2018, the bottom line is likely to be up 370.6%.

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