Energy-focused engineering and construction company, McDermott International Inc. (MDR) reported better-than-expected third-quarter earnings, driven by robust performance from the Offshore Oil and Gas Construction segment. Earnings per share came in at 50 cents, 10 cents above the Zacks Consensus Estimate and 13 cents above the prior-year period. Revenues were up marginally (by 0.7%) to $1.7 billion.
Offshore Oil and Gas Construction
McDermott’s Offshore Oil and Gas Construction segment revenues were up 26% to a record $1 billion, as higher sales in the Middle East and Caspian regions more than offset reduced levels in other areas. Operating income for the quarter came in at $106.5 million (second highest quarterly income ever), compared to a loss of $19.7 million during the third quarter of 2008, reflecting strength in the Asia Pacific and Middle East regions. As of Sept 30, 2009, segment backlog was $3.9 billion, as against a backlog of $5 billion in the year-ago period.
Government Operations
Government Operations segment fetched revenues of $259.8 million, up from $222.4 million in the third quarter of 2008, primarily on the back of contribution from the Nuclear Fuel Services acquisition. Additional volume in the manufacture of nuclear components of certain U.S. Government programs and recovery work also helped the results. However, operating income for the quarter was down 42.7% to $19.8 million, attributable to project losses on down blending activities, together with additional depreciation and amortization expense. McDermott’s backlog, as at the end of the quarter, was $2.5 billion, up $900 million year over year.
Power Generation Systems
Revenues for McDermott’s Power Generation Systems segment decreased 38.3% to $389.6 million, adversely affected by reduced activity on customers’ major capital projects including new power plant construction and retrofits of existing power plants. Operating income was down approximately 59.5% to $34.2 million on the back of lower activity levels in the business. McDermott ended the quarter with a backlog of $2.1 billion, compared to backlog of $2.8 billion in the previous-year quarter.

Read the full analyst report on “MDR”
Zacks Investment Research