(RTTNews) - Tuesday, Credit Suisse upgraded McDermott International Inc. (MDR: News ) shares to Outperform from Neutral and increased its price target to $31 from $27. The brokerage raised its 2010 EPS estimate to $2.05, and its 2011 estimate to $2.40.

Analyst Cook believes MDR would be one of the few E&C companies that can grow EPS in 2010, as the market shifts towards upstream and as problem projects are completed. The analyst raised his estimates to reflect his increased confidence on J. Ray awards and margin improvement, partially offset by lower revenue and profit dollars in power generation.

The analyst said that over half of MDR's revenues are generated from the upstream market, the sweet spot of the oil and gas market over the next several years. Bidding activity in the Middle East and Asia Pacific remains very high, with sizable awards coming at the end of 2009 and beyond. RFPs in the Caspian region are also tracking ahead of schedule by one year.

The analyst noted that the last of three problem projects will be done in fourth quarter of 2009. Even so, margins have improved each quarter, from losses last year to now over an 8% margin, suggesting management has control of the issues. Excluding problem projects, margins are tracking at the high end of the 10-12% range. Last, MDR expects oil and gas profits in 2011-2013 to be higher than 2005-2007.
The analyst added that Albeit a longer term opportunity, 2013 & beyond, MDR is developing a modular nuclear reactor which is comparable on cost per MW, reduces the cost risk for the utility, is scalable, easier to finance and cuts time to build a nuclear power plant by almost half. This could be a sizable and very profitable opportunity for MDR.

Currently, MDR is up $1.31 or 5.29% and trading at $26.06.

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by RTT Staff Writer

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