Falling Earnings Estimates Signal Weakness Ahead for McDermott International (MDR) - Tale of the Tape

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Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is McDermott International Inc. MDR which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in MDR.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 3 estimates moving down in the past 30 days, compared to no upward revision. This trend has caused the consensus estimate to trend lower, going from earnings of 8 cents a share a month ago to its current level of a loss of 8 cents.

Also, for the current quarter, McDermott International has seen 2 downward estimate revisions versus 1 revision in the opposite direction, dragging the consensus estimate down to a loss of 12 cents per share from a loss of 6 cents a share over the past 30 days.   

The stock has also seen some pretty dismal trading lately, as the share price has dropped 11.6% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don't have a long time horizon to wait.

If you are still interested in the Oils/Energy sector, you may instead consider some better-ranked stocks including, Vermilion Energy Inc. (VET), Valero Energy Corporation VLO and Clayton Williams Energy, Inc. CWEI. While Vermilion carries a Zacks Rank #1 (Strong Buy), Clayton Williams and Valero hold a Zacks Rank #2 (Buy). With favorable Zacks Ranks, these stocks may be better selections at this time.

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WILLIAMSCENGY CWEI: Free Stock Analysis Report

MCDERMOTT INTL MDR: Free Stock Analysis Report

VERMILION EGY (VET): Free Stock Analysis Report

VALERO ENERGY VLO: Free Stock Analysis Report

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