Following a second quarter earnings miss, we are downgrading McDermott International (MDR) shares to Underperform from Neutral. The company recently reported lower-than-expected EPS for the June quarter, adversely affected by a less favorable geographic mix and weak margins in the Middle East.
Near-term bookings remain lumpy at McDermott, as the current uncertain environment has hurt the economics of building new oil and gas infrastructure. Additionally, the transfer of the power generation and government operations has left McDermott with a less diversified business, thereby heightening its risk profile.
These factors are reflected in our downgrade of the company's shares. Our $12 price objective reflects a 2011 P/E multiple of 10.1x.
MCDERMOTT INTL (MDR): Free Stock Analysis Report
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