McDermott International (MDR) vs. Halliburton (HAL) Critical Review

Halliburton (NYSE: HAL) and McDermott International (NYSE:MDR) are both oils/energy companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, dividends, profitability, analyst recommendations, valuation, earnings and institutional ownership.

Insider & Institutional Ownership

79.3% of Halliburton shares are owned by institutional investors. Comparatively, 85.0% of McDermott International shares are owned by institutional investors. 0.5% of Halliburton shares are owned by insiders. Comparatively, 1.3% of McDermott International shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations for Halliburton and McDermott International, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Halliburton 0 2 24 0 2.92
McDermott International 0 4 3 0 2.43

Halliburton presently has a consensus price target of $57.05, indicating a potential upside of 34.45%. McDermott International has a consensus price target of $8.18, indicating a potential upside of 25.96%. Given Halliburton’s stronger consensus rating and higher possible upside, research analysts clearly believe Halliburton is more favorable than McDermott International.

Profitability

This table compares Halliburton and McDermott International’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Halliburton 1.13% 6.93% 2.47%
McDermott International 2.95% 5.55% 2.78%

Volatility and Risk

Halliburton has a beta of 1.09, indicating that its stock price is 9% more volatile than the S&P 500. Comparatively, McDermott International has a beta of 1.41, indicating that its stock price is 41% more volatile than the S&P 500.

Earnings and Valuation

This table compares Halliburton and McDermott International’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Halliburton $17.09 billion 2.16 $2.51 billion $0.24 176.80
McDermott International $2.51 billion 0.73 $304.29 million $0.27 24.04

Halliburton has higher revenue and earnings than McDermott International. McDermott International is trading at a lower price-to-earnings ratio than Halliburton, indicating that it is currently the more affordable of the two stocks.

Dividends

Halliburton pays an annual dividend of $0.72 per share and has a dividend yield of 1.7%. McDermott International does not pay a dividend. Halliburton pays out 300.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Halliburton beats McDermott International on 8 of the 15 factors compared between the two stocks.

About Halliburton

Halliburton Company provides services and products to the upstream oil and natural gas industry throughout the lifecycle of the reservoir, from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the field. It operates through two segments: the Completion and Production segment, and the Drilling and Evaluation segment. The Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift and completion services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation and wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities. It serves national and independent oil and natural gas companies. As of December 31, 2016, it had conducted business in approximately 70 countries around the world.

About McDermott International

McDermott International, Inc. is a provider of integrated engineering, procurement, construction and installation (EPCI), front-end engineering and design (FEED) and module fabrication services for upstream field developments across the world. The Company delivers fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for offshore and subsea oil and gas projects. It operates through three segments: the Americas, Europe and Africa (AEA), the Middle East (MEA) and Asia (ASA). As of December 31, 2016, operated in approximately 20 countries across the Americas, Europe, Africa, the Middle East, Asia and Australia, its integrated resources include a diversified fleet of marine vessels, fabrication facilities and engineering offices. It support its activities with project management and procurement services, while utilizing its fully integrated capabilities in both shallow water and deepwater construction.

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