NEW YORK (AP) — Shares of McDermott International Inc., which designs and builds offshore drilling platforms, slumped Friday as delays and project losses hurt its results and its outlook.
THE SPARK: The Houston company reported its fourth-quarter results after the market closed on Thursday. McDermott turned a profit of $40.5 million, or 17 cents per share. Revenue grew 22 percent, to $996 million. Revenue from its Asia-Pacific business climbed 36 percent, and it reported more modest growth from the Middle East and Atlantic regions.
In the latest quarter the company reported $32 million in losses and increased costs related to some of its projects. That included $23 million in losses from an Asia-Pacific subsea project that should be completed late this year and $9 million in losses related to lower-than-expected productivity related to two Atlantic projects. CEO Stephen Johnson said the Atlantic business "continued to be challenged" and took a loss during the period.
Analysts expected the company to report net income of 23 cents per share on $979.8 million in revenue, according to FactSet.
THE BIG PICTURE: In the fourth quarter of 2011 McDermott took a loss of $10 million, or 4 cents per share because of losses on projects in Mexico and Brazil.
The company's net income grew 49 percent in 2012, reaching $206.7 million, or 87 cents per share. Revenue rose 6 percent to $3.64 billion.
McDermott said it expects about $3 billion in revenue in 2013. The company said it is focused on choosing the right projects, which means some of its assets won't get used. It expects the underutilization to hurt its profit margins.
Analysts expected McDermott to report $3.11 billion in annual revenue on average.
THE ANALYSIS: Credit Suisse analyst Jamie Cook said Thursday that McDermott's profit margins fell short of its expectations in the fourth quarter, and it's not clear when the company will be able to approach its profitability goals. The analyst said the Asia-Pacific losses raise questions about McDermott's strategy.
SHARE ACTION: McDermott shares fell $1.96, or 15.4 percent, to $10.77 in afternoon trading. The stock had risen 29 percent since mid-November.
