Why McDermott Shares Popped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of engineering and construction company McDermott International (NYS: MDR) climbed 13% on Friday after its quarterly results easily topped Wall Street expectations.
So what: The stock has been beaten over the past year on concerns over slowing drilling activity, but a big first-quarter earnings beat -- EPS from continuing operations of $0.25 versus the consensus of just $0.15 -- suggests that Wall Street's worst fears are overblown. In fact, McDermott's backlog surged 21% from the year-ago period to $5.8 billion, triggering plenty of turnaround optimism among investors.
Now what: Don't let today's pop prevent you from looking into the stock. "With record bookings, an all-time high backlog and a continued strong balance sheet, McDermott is building a solid foundation for the future," said CEO Stephen Johnson. More important, with the stock still off about 50% from its 52-week high and trading at a forward P/E of 10, you won't have to pay a high price to buy into that bullishness.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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