Credit Suisse Has Positive Outlook For McDermott International

In a report published Tuesday, Credit Suisse analyst Jamie Cook reiterated an Outperform rating and $3.50 price target on

. In the report, Credit Suisse noted, "MDR reported Q4'14 EPS of $0.03, ahead of the street estimate of a loss of $0.06. The beat was both on the revenue and margin fronts. Sales of $806.4M increased 55.9% y/y and were ahead of the consensus of $715.4M largely tied to the ramp in Ichthys. More important, MDR reported operating income of $25.9M, or a 3.2% margin, tied largely to profitability in AP and ME vs. modest losses in the Americas. MDR is showing encouraging signs the turnaround is progressing, with the loss project portfolio contributing positively to gross profit in the quarter. "For 2015, MDR guided ahead of the street, expecting $3.3-$3.6B in sales and operating income of $25-$50M including rest. charges of $25-$35M. Mgmt. expects annualized savings of $50M in 2015 and $100M starting in 2016, implying margins in the 5% range by 2016. OCF is expected to be positive in 2015 and capex is expected to ramp down significantly in 2016. MDR remains focused on work that has a higher probability of moving ahead (Middle East, brownfield and with NOCs) and where the company can bring a differentiated solution. However, new wins are critical as MDR is left with $517M of backlog for 2016 based on the assumed burn rate for 2015. We lower FY'15 EPS to -$0.12, maintain FY'16, and lower FY'17 to $0.20." McDermott International closed on Monday at $2.61.