A month has gone by since the last earnings report for McDermott . Shares have lost about 21.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is McDermott due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
McDermott Lags on Q1 Earnings, Sales Beat Estimate
Mcdermott reported adjusted earnings per share of 2 cents, missing the Zacks Consensus Estimate of 9 cents and significantly below the year-ago profit of 52 cents. The weaker-than-expected bottom line reflects the impact of higher costs. In particular, quarterly expenses surged more than four-fold year over year to $2.2 billion.
Revenues of $2.2 billion were marginally ahead of the Zacks Consensus Estimate and surged 263.6% from the year-ago quarter on strong market share and encouraging sector dynamics.
On a further positive note, McDermott said that it clinched $6.7 billion in new awards during the first quarter, ahead of the Zacks Consensus Estimate of $4.8 billion. Further, the energy equipment supplier saw its backlog increase 41% sequentially to $15.4 billion.
Revenue Pipeline
McDermott’s boasts of a ‘Revenue Opportunity Pipeline’ of around $91 billion, which, according to the company, includes Backlog, Bids & Change Orders Outstanding, and Target Projects. As of Mar 31, McDermott had a backlog of $15.4 billion (ahead of the Zacks Consensus Estimate of . It had $17.7 billion in Bids & Change Orders Outstanding and $58 billion in Target Projects. The company’s revenue pipeline is primarily driven by North, Central & South America (‘NCSA’), as well as Middle East & North Africa (‘MENA’) segments with new orders in the offshore/subsea, downstream and LNG markets.
Capital Expenditure & Balance Sheet
During the quarter, McDermott spent approximately $18 million on capital programs – same as last year. As of Mar 31, 2019, the company had $413 million in cash and cash equivalents and $714 million available under revolving credit facility. The company’s long-term debt totaled roughly $3.4 billion, reflecting a debt-to-capitalization ratio of 83.4%.
Guidance & Outlook
McDermott expects cash flow deficit of around $310 million in 2019 following the deferral of a mega petrochemical project and its advance payment into 2020. Taking into consideration the expected capital budget of around $160 million, negative free cash flow for this year is likely to be about $470 million.
At the same time, the company expects its operating performance to improve in the second half of this year on higher utilization, merger cost synergies and the implementation of recent bookings.
McDermott, which informed about the completion the final offshore campaign for the Ichthys LNG project, located offshore Western Australia, sees 2019 revenues at around $10 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -48.39% due to these changes.
VGM Scores
At this time, McDermott has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, McDermott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is McDermott (MDR) Down 21.5% Since Last Earnings Report?
A month has gone by since the last earnings report for McDermott . Shares have lost about 21.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is McDermott due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
McDermott Lags on Q1 Earnings, Sales Beat Estimate
Mcdermott reported adjusted earnings per share of 2 cents, missing the Zacks Consensus Estimate of 9 cents and significantly below the year-ago profit of 52 cents. The weaker-than-expected bottom line reflects the impact of higher costs. In particular, quarterly expenses surged more than four-fold year over year to $2.2 billion.
Revenues of $2.2 billion were marginally ahead of the Zacks Consensus Estimate and surged 263.6% from the year-ago quarter on strong market share and encouraging sector dynamics.
On a further positive note, McDermott said that it clinched $6.7 billion in new awards during the first quarter, ahead of the Zacks Consensus Estimate of $4.8 billion. Further, the energy equipment supplier saw its backlog increase 41% sequentially to $15.4 billion.
Revenue Pipeline
McDermott’s boasts of a ‘Revenue Opportunity Pipeline’ of around $91 billion, which, according to the company, includes Backlog, Bids & Change Orders Outstanding, and Target Projects. As of Mar 31, McDermott had a backlog of $15.4 billion (ahead of the Zacks Consensus Estimate of . It had $17.7 billion in Bids & Change Orders Outstanding and $58 billion in Target Projects. The company’s revenue pipeline is primarily driven by North, Central & South America (‘NCSA’), as well as Middle East & North Africa (‘MENA’) segments with new orders in the offshore/subsea, downstream and LNG markets.
Capital Expenditure & Balance Sheet
During the quarter, McDermott spent approximately $18 million on capital programs – same as last year. As of Mar 31, 2019, the company had $413 million in cash and cash equivalents and $714 million available under revolving credit facility. The company’s long-term debt totaled roughly $3.4 billion, reflecting a debt-to-capitalization ratio of 83.4%.
Guidance & Outlook
McDermott expects cash flow deficit of around $310 million in 2019 following the deferral of a mega petrochemical project and its advance payment into 2020. Taking into consideration the expected capital budget of around $160 million, negative free cash flow for this year is likely to be about $470 million.
At the same time, the company expects its operating performance to improve in the second half of this year on higher utilization, merger cost synergies and the implementation of recent bookings.
McDermott, which informed about the completion the final offshore campaign for the Ichthys LNG project, located offshore Western Australia, sees 2019 revenues at around $10 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -48.39% due to these changes.
VGM Scores
At this time, McDermott has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, McDermott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.