McDermott Reports Solid if Not Spectacular Results

Yet another of the infrastructure holdings is out after hours; McDermott (MDR) has a solid, if not spectacular report. Of the two main divisions, Offshore Oil & Gas continues to impress while Power Generation Systems continues to be the laggard. Backlog up to $9.8B, from $9.3B in the previous quarter. Again, as with many of these infrastructure plays, this level of backlog represents nearly 2 years worth of future business.

McDermott used to be the #1 holding in the fund back last August, but only holds a minor position at this time; I'd like to see both divisions running on all cylinders. But expectations were quite low, so the company was able to beat estimates by a nickel. McDermott does not break out sales by region in the earnings report, but from memory quite a bit is outside the US.

• McDermott International, Inc. (MDR) today reported net income of $160.0 million, or $0.70 per diluted share, for the 2007 fourth quarter, compared to net income of $125.5 million, or $0.55 per diluted share, for the corresponding period in 2006.
• McDermott’s revenues in the fourth quarter of 2007 were $1,526.0 million, an increase of 16.7 percent compared to $1,308.0 million in the corresponding period in 2006. The $218 million improvement in Company revenues, compared to a year ago, was a result of the Offshore Oil & Gas Construction segment which increased revenues by approximately $257 million, or 54.1 percent.
• At December 31, 2007, McDermott’s consolidated backlog was $9.8 billion, compared to $7.6 billion and $9.3 billion at December 31, 2006 and September 30, 2007, respectively.
• Revenues in the Offshore Oil & Gas Construction segment were $733.3 million in the 2007 fourth quarter, compared to $475.9 million for the same period a year ago. The year-over-year increase in revenues resulted from a higher workload in worldwide marine activities, including revenues from Secunda International Limited whose assets were acquired in July 2007, and from increased activities within the Caspian, Middle East and Americas regions.
• Revenues in the Power Generation Systems segment for the fourth quarter 2007 were $608.0 million, compared to $676.8 million reported in the fourth quarter of 2006. The year-over-year reduction in revenues resulted from lower activities on new fossil utility steam systems and retrofits of existing facilities compared to a year ago, partially offset by higher levels of replacement parts and increased activity on nuclear steam generators.

Disclosure: Long McDermott in fund; no personal position

Comments

[Stephen Ros...:]

Last year's quarter included 43 million dollars of a one time only tax benefit. Take that out of the 125 million and you get 82 million for Q4 2006. That means that the current 160 million is a 100% gain. This is more than a solid performance. Also oil and gas income was up 100%, power income up 280%, government income up 67%.

2008 Mar 01 06:12 PM