Why McDermott's Shares Dropped Today

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 drilling platform builder McDermott fell 16% today after the company reported earnings.

So what: Revenue rose 22% in the fourth quarter, to $996 million, which came in ahead of the $980 million estimate from analysts, but the bottom line wasn't as strong. Net income was $40.5 million, or $0.17 per share, which was well below the $0.23 estimate; hence, the fall today.

Now what: The company is being more choosy about the projects it undertakes, which is leading to lower margins, a trend that management expects to continue. Investors were hoping for big things next year, but estimates may have gotten ahead of actual operations. I'd take a cautious approach. McDermott is still profitable, however, so if the stock falls into single digits, it may be worth scooping up for the long-term.

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The article Why McDermott's Shares Dropped Today originally appeared on Fool.com.

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