McDermott International (MDR) Stock Rises on Riser Support Delivery, Contract Announcement

NEW YORK (TheStreet) -- Shares of McDermott International  (MDR) rose 5.12% to $4.31 in afternoon trading Wednesday after the engineering company announced it had delivered a riser support structure for the INPEX-operated Ichthys LNG Project.

The company made the delivery to the project's subsea umbilical, riser, flowline development.

McDermott also announced Tuesday it had signed a three-year shallow water pipeline contract with Brunei Shell Petroleum Company to transport and install pipelines and umbilicals for the Champion and Ampa Fields offshore Brunei.

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"Earlier this year we established a dedicated presence in Brunei and demonstrated outstanding execution delivering project certainty on the transportation and installation of four jackets for the BSP Champion Waterflood B2/3 development," said McDermott president and CEO David Dickson in a statement. "BSP's confidence in our efficient planning, seamless offshore operations and excellent safety performance is demonstrated by the award of this significant new project, which is one of BSP's largest contracts in recent years."

Separately, TheStreet Ratings team rates MCDERMOTT INTL INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate MCDERMOTT INTL INC (MDR) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, MCDERMOTT INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$70.58 million or 177.87% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for MCDERMOTT INTL INC is currently extremely low, coming in at 13.74%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, MDR's net profit margin of -2.27% significantly underperformed when compared to the industry average.
  • MDR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 51.16%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The revenue fell significantly faster than the industry average of 13.8%. Since the same quarter one year prior, revenues fell by 26.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: MDR Ratings Report

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