Offshore oil and gas-focused engineering and construction firm, McDermott International Inc. MDR reported stellar second-quarter 2015 results. Improved execution of projects led to the strong result.

The company reported adjusted earnings of 12 cents per share, which compared favorably with the Zacks Consensus Estimate of a loss of 4 cents as well as the year-ago quarter loss of 17 cents.

McDermott International Inc. - Earnings Surprise | FindTheBest

McDermott generated revenues of $1,046.5 million in the quarter, which surged from the prior-year quarter level of $476.1 million. The top line also came in significantly above the Zacks Consensus Estimate of $834 million.

Total Expenses

Total costs and expenses, however, increased a massive 126% from that in the year-ago quarter to $997.4 million.

Backlog

At the end of the second quarter, McDermott had a backlog of $3,130.3 million, down from $4,063.9 million a year ago. Of the total backlog, 52% is related to offshore operations and the remaining 48% pertains to subsea operations.

Balance Sheet

Capital expenditure for McDermott during the quarter was about $24 million.

As of Jun 30, 2015, McDermott had cash and cash equivalents of $576.6 million and long-term debt (including current maturities) of approximately $854.2 million. This represents a debt-to-capitalization ratio of about 35.5%.  

Guidance

McDermott provided a revised outlook for the full-year results. Projections for revenues have been reduced to $3–$3.3 billion from $3.3–$3.6 billion due to delays at the Ichthys project during the first quarter.

The company, however, increased its operating income guidance to $50–$70 million from $25–$50 million. Better execution skills and cost-improvement measures prompted the increase.

McDermott anticipates full-year capital spending at $130–$140 million, substantially below the prior guidance of $275–$295 million. The decline is due to the delay in receiving delivery of the vessel DLV 2000.  

Zacks Rank

Houston, TX-based McDermott currently carries a Zacks Rank #3 (Hold).

Some better-ranked players from the oilfield machinery and equipment industry are Mitcham Industries Inc. MIND, Cameron International Corporation CAM and PEDEVCO Corp. PED. While Mitcham Industries sports a Zacks Rank #1 (Strong Buy), both Cameron International and PEDEVCO hold a Zacks Rank #2 (Buy).

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