Shares of McDermott International (NYSE: MDR) tumbled nearly 25% by 10:30 a.m. EST on Wednesday after the engineering and construction company disclosed that it experienced some cost overruns while constructing the Cameron LNG project in Louisiana.
Continue Reading Below
McDermott and its 50-50 joint venture partner Chiyoda Corporation recently reassessed their progress on the construction of the Cameron LNG project. As a result of that assessment, McDermott said that it expects to report a charge of $168 million during the fourth quarter due to unfavorable labor productivity, increases in subcontracts, and commissioning and construction management costs. The company noted that the charge would negatively impact its fourth-quarter and full-year results for 2018.
The charge isn't the first one by the company, as cost overruns have hampered it in recent years. In the third quarter, for example, the company recorded $744 million in charges after three projects didn't perform as well as expected. While the company noted at its recent investors' day that those projects were outliers and that the rest were progressing as planned, the charge on Cameron LNG suggests otherwise.
McDermott can't seem to get a handle on what it will cost to build the large-scale energy projects it constructs for customers. Because of that, the company's stock has been under significant pressure in recent months. That volatility will likely continue until the company proves it can complete projects on budget.
10 stocks we like better than McDermott InternationalWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and McDermott International wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of January 31, 2019