Bullish Signs From McDermott's Quarterly Conference Call

Mar.20.08 | About: McDermott International, (MDR)

It pays to listen to conference calls.

McDermott International’s (NYSE:MDR) last quarter conference call is a case in point. In that call, Bruce Wilkinson, their CEO, announced key information about his company:

l. They expect to announce several big deals in their off shore oil division. There will likely be deals that are worth 1 billion dollars a piece.

2. They anticipate inking several 1 billion dollar contracts in their power divisions. This division has never seen any orders for over a ½ billion dollars.

“We currently believe there are a handful of large projects that we will book in the next month or two that will represent well over $1 billion in new orders.”

Question form Jamie Cook: “You mentioned over $1 billion of awards in the next 90 days and then a lot of $100 million-300 million awards. I guess, I haven’t seen awards of over 1 billion in a while from J Ray, probably since 2006.”

Answer: "I don’t recall that we have ever gotten or received a single billion dollar award."

This is from a company with a 9.8 billion dollar backlog now telling us of 3 or 4 very likely billion dollar deals in the near future.

3. McDermott does strong business with the Department of Energy, especially in their nuclear division. They plan on going after similar business offered by the Department of Defense.

“I think we’ve long felt that our capabilities in the government sector in the DOE experience can be adapted to particularly the DOD.”

4. Wilkinson believes that they can take there positive experiences in delivering power in China and bring that to India which he feels will become a much bigger market.

McDermott already had a lot going for it this quarter. They earned $160 million this quarter. Q4 2006 they made $125 million. That quarter included a one time tax benefit of $43 million. Remove that and they doubled their earnings. The CEO points out that with no debt, $1.4 billion cash, and a strong global business they are well positioned in the current environment to do well.

Disclosure: Long MDR