McDermott Shares Got Crushed: What You Need to Know
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 specialist McDermott International (NYS: MDR) plummeted more than 30% on Thursday after the company took a hatchet to its third-quarter profit outlook.
So what: McDermott's cut was so brutal -- it now sees third-quarter EPS of $0.03-$0.05 versus the consensus of $0.29 -- that Mr. Market is being forced to take the shares to a new two-year low. Revenues have been relatively solid, but spiking expenses and big writedowns -- the forecast includes roughly $50 million of project losses -- continue to weigh heavily on margins, not to mention investor patience.
Now what: I'd look into this plunge as a possible entry point. While the short-term outlook is obviously disappointing, CEO Stephen Johnson reassured investors that the third-quarter results "are not indicative of our outlook for the future." Management is expected to say those kinds of things, of course, but given the company's cash-rich balance sheet and the solid overseas growth it's been seeing, Johnson has decent reason to be positive about the long-term.
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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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