McDermott International Upped To Strong Buy As Oil Rallies

On May 21, 2016, Zacks Investment Research upgraded McDermott International (NYSE:MDR) to a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies holding a Zacks Rank #1 have strong chances of outperforming the broader market over the next few quarters.

Why the Upgrade?

Incorporated in 1959, Houston, TX-based McDermott is a leading global engineering and construction firm that has a diversified product portfolio and is one of the few global contractors that can provide a complete array of services – from design to construction.

The company operates in most major offshore oil and gas producing regions and has significant presence in countries where state-owned entities continue to scout for production growth and new resources. This helps the company to grab contract regularly despite the low commodity price environment.

Moreover, the company has a solid backlog position at $3.8 billion, which not only reflects steady demand from its customers but also offers long-term earnings and cash flow visibility.

Hence, given McDermott’s geographic footprint in high-growth regions, strong backlog positon, technology leadership and efficient execution skills, the company is expected to be in a better position to weather the current uncertain environment in the energy engineering and construction space.

The company posted positive earnings surprises in the trailing four quarters at an average of 506.54%. For the first quarter of 2016, McDermott reported better-than-expected earnings and revenues on the back of operational profitability and improved execution of projects.

Stocks to Consider

Other favorably placed stocks from the broader energy sector are World Point Terminals, LP (NYSE:WPT) , Braskem S.A. (NYSE:BAK) and Pembina Pipeline Corporation (NYSE:PBA) . All these stocks also sport a Zacks Rank #1.