Reviewing McDermott International (MDR) & Archrock (AROC)

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

Dividends

Archrock pays an annual dividend of $0.48 per share and has a dividend yield of 4.8%. McDermott International does not pay a dividend. Archrock pays out -49.0% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares McDermott International and Archrock’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
McDermott International $2.64 billion 0.94 $34.11 million $0.53 16.38
Archrock $807.07 million 0.94 -$54.55 million ($0.98) -10.10

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

Analyst Ratings

This is a summary of current ratings and recommmendations for McDermott International and Archrock, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
McDermott International 1 3 4 0 2.38
Archrock 0 6 2 0 2.25

McDermott International currently has a consensus target price of $7.89, suggesting a potential downside of 9.13%. Archrock has a consensus target price of $13.13, suggesting a potential upside of 32.58%. Given Archrock’s higher probable upside, analysts plainly believe Archrock is more favorable than McDermott International.

Institutional & Insider Ownership

85.2% of McDermott International shares are owned by institutional investors. Comparatively, 83.7% of Archrock shares are owned by institutional investors. 1.3% of McDermott International shares are owned by insiders. Comparatively, 2.5% of Archrock shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
McDermott International 5.25% 9.56% 4.80%
Archrock -8.62% -2.93% -0.83%

Summary

McDermott International beats Archrock on 9 of the 14 factors compared between the two stocks.

McDermott International Company Profile

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.

Archrock Company Profile

Archrock, Inc. is a natural gas contract operations services company. The Company also provides natural gas compression services to customers in the oil and natural gas industry throughout the United States and supplies aftermarket services to customers that own compression equipment in the United States. The Company operates through two segments: contract operations and aftermarket services. The contract operations segment primarily provides natural gas compression services to meet specific customer requirements. The Company provides contract operations services, including the personnel, equipment, tools, materials and supplies to meet its customers’ natural gas compression needs. The aftermarket services segment provides a range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.

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