DA Davidson Downgrades McDermott (MDR) to Neutral Due to Management's New Outlook
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Price: $0.70 --0%
Rating Summary:
4 Buy, 15 Hold, 4 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
Rating Summary:
4 Buy, 15 Hold, 4 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
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DA Davidson downgraded shares of McDermott (NYSE: MDR) to a Neutral rating from its previous rating of Buy while reducing its price target from $18 to $11.
Management reported that it is now forecasting earnings of $0.03-$0.05 for the third quarter, well below the $0.29 per share estimate that the Street and firm was forecasting. The company also indicated lower margins in the range of 7-10 percent due to timing of work and pricing.
Shares of MDR are trading down 26 percent on the day to $10.80. The company will report its actual results on November 8th.
McDermott highlighted only roughly $420 million in new awards for the third quarter and is currently pursuing over $20 billion in additional projects. The firm notes the project losses are due to cost overruns on five projects.
An analyst at DA Davidson comments, "Management hopes to recover some of these costs overruns, but success appears uncertain. The problem projects are expected to be largely completed in early 2012. However, the magnitude of losses and number of projects raises concerns regarding the stability of future margins."
To go inline with the company's new outlook, the firm cut its Q3 and FY11 EPS estimates from $0.29 and $1.14 to $0.04 and $0.85. DA Davidson also reduced its FY12 estimate from $1.25 to $0.90.
For more ratings news on McDermott click here and for the rating history of McDermott click here.
Shares of McDermott closed at $14.63 yesterday.
Management reported that it is now forecasting earnings of $0.03-$0.05 for the third quarter, well below the $0.29 per share estimate that the Street and firm was forecasting. The company also indicated lower margins in the range of 7-10 percent due to timing of work and pricing.
Shares of MDR are trading down 26 percent on the day to $10.80. The company will report its actual results on November 8th.
McDermott highlighted only roughly $420 million in new awards for the third quarter and is currently pursuing over $20 billion in additional projects. The firm notes the project losses are due to cost overruns on five projects.
An analyst at DA Davidson comments, "Management hopes to recover some of these costs overruns, but success appears uncertain. The problem projects are expected to be largely completed in early 2012. However, the magnitude of losses and number of projects raises concerns regarding the stability of future margins."
To go inline with the company's new outlook, the firm cut its Q3 and FY11 EPS estimates from $0.29 and $1.14 to $0.04 and $0.85. DA Davidson also reduced its FY12 estimate from $1.25 to $0.90.
For more ratings news on McDermott click here and for the rating history of McDermott click here.
Shares of McDermott closed at $14.63 yesterday.
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