We are maintaining our Neutral recommendation on McDermott International. Given its geographic footprint in high-growth regions, technology leadership and efficient execution skills, MDR is poised to benefit from strong industry fundamentals for offshore construction activities through 2014 and beyond. We believe order flow and backlog for its products and services will continue to be healthy and trend higher in the near-to-medium term. Additional positives include growing international operations and a solid balance sheet. However, several factors will continue to weigh on results, including steep operating costs, an erratic earnings trend over the last few quarters and uncertainty regarding the timing of big awards. As such, we expect its growth potential to be restrained.
Overview:
Incorporated in 1959, Houston, Texas-based McDermott International Inc. (NYSE: MDR) is an engineering and construction company, solely focused on the offshore oil and gas business. McDermott primarily serves the worldwide offshore oil and gas field developments, including the front-end design and detailed engineering, fabrication and installation of offshore drilling and production facilities, as well as installation of marine pipelines and subsea production systems. Additionally, the company provides project management and procurement services. It operates in most major offshore oil and gas producing regions, including the U.S., Mexico, Canada, the Middle East, India, the Caspian Sea and Asia Pacific.
In August 2010, McDermott completed the spin-off of its Power Generation Systems' and Government Operations segments into a separate, independent and publicly traded company Babcock & Wilcox Co. (NYSE: BWC).
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