D-Day at McDermott

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After falling more than 10% in after-hours trading on Monday, shares of McDermott International Inc. (NYSE: MDR) were still down sharply Tuesday morning. This is after net income and revenue fell well short consensus estimates and the company withdrew its previous guidance.

For the fourth quarter, the engineering and construction specialist for the oil industry posted a diluted earnings per share (EPS) loss of $1.37 per share on revenues of $517.34 million. For the fourth quarter of 2012 the company posted EPS of $0.17 on revenues of $995.95 million. Fourth-quarter results compare to the Thomson Reuters consensus estimates for earnings of $0.15 a share and $825.61 million in revenues.

For the full year, McDermott posted an EPS loss of $2.19 on revenues of $2.8 billion, compared with EPS of $0.87 on revenues of $3.64 billion in 2012. The consensus estimates called for a net loss of $0.67 per share on revenues of $2.96 billion.

The company’s CEO said in the conference call:

[W]e are addressing some of the deepest challenges our company has seen in years. We are learning and growing from those challenges and restructuring both financially and operationally to ensure that we have the resources and the dynamic and accountable organization to achieve long-term success to best meet our customers’ needs.

The trouble is the company is seen as a low-quality operator that regularly underperforms expectations and faces cost overruns. The fact that management withdrew the forward guidance and has suspended the practice of offering guidance is a sign of serious problems. That along with the huge decline in revenue and operational problems means the company has a long slog ahead if it is to turn itself around.

Shares were down about 10% in early trading Tuesday, at $7.34 in a 52-week range of $6.68 to $11.38. More than three times the average daily volume had already changed hands. Thomson Reuters had a consensus target price for the shares at around $8.80 before the disappointing report.

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