Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Dec 27, we reiterated our Neutral recommendation on Chicago Bridge & Iron Company N.V. (CBI - Analyst Report) largely due to its modest third quarter performance. We prefer to remain on the sidelines until we see substantial organic growth and improvement in the overall industry environment.

Why a Neutral Recommendation?

On Oct 30, Chicago Bridge & Iron Company reported third-quarter 2013 adjusted earnings of $121.3 million or $1.12 per share, in line with the Zacks Consensus Estimate. Adjusted net income improved 46.7% year over year on the back of strong project activities during the quarter.

The growth was primarily driven by healthy revenue growth across all the three legacy business units of the company due to rising demand for energy infrastructure, especially in the LNG, gas processing and oil and gas markets across the world. The company’s acquired business units drove the majority of the revenue growth.

In the quarter, all the four segments of the company reported an increase in revenues. The key growth drivers were increased activities in LNG and gas processing work in the Asia-Pacific, robust domestic and international markets, development of shale gas, petrochemical and LNG, increased business in heat transfer, and licensing and new deal wins from both private and public entities.

Recently, the company received a number of new EPC (engineering, procurement and construction) contracts that included a $70 million contract from Saudi Arabia-based Petrofac Co. Ltd for constructing crude oil storage tanks and another $1-billion worth contract from Ingleside Ethylene LLC for the Texas-based ethane cracker project.

The company also received a couple of deals valued at $2.5 billion each in a joint venture with Zachry Industrial, Inc to convert the existing LNG regasification terminal in Freeport, Texas into an LNG liquefaction terminal.

However, the company’s geographically diversified business exposes it significantly to the fluctuations in foreign currencies. In addition, the company is highly exposed to the risks of various external operational hazards including change in political or economic conditions.

Moreover, the company’s weak cash and balance sheet position does not facilitate enough flexibility to make investments and make strategic acquisitions. Its operating cash flow has decreased by more than 240% in the last reported quarter, whereas cash and cash equivalents dipped about 17.1% year over year. Thus, we prefer to remain on the sidelines and maintain our Neutral recommendation on Chicago Bridge & Iron Company.

Other Stocks to Consider

Chicago Bridge & Iron Company currently has a Zacks Rank #3 (Hold). Investors interested in the heavy industries sector can consider VSE Corp. (VSEC - Snapshot Report), Quanta Services, Inc. (PWR - Analyst Report) and ITT Corp (ITT - Analyst Report). While VSE carries a Zacks Rank #1 (Strong Buy), Quanta and ITT both carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%