Back to top

Analyst Blog

Engineering company Chicago Bridge & Iron Company N.V. (CBI - Analyst Report) posted fourth-quarter adjusted earnings of $230.0 million or $1.91 per share (excluding the one time items), well exceeding the Zacks Consensus Estimate of $1.17 per share. Adjusted net income improved 59.2% year over year on the back of strong project activities during the quarter.

Increased backlog levels, growing demand for energy across the globe and CBI’s diligent operational execution while focusing on safety coupled with its unique business model are the key drivers behind the company’s outperformance.

On a GAAP basis, the company reported earnings of $196.8 million or $1.80 per share. GAAP earnings included acquisition-related costs of $19.3 million or 4 cents per share.              

For full-year 2013, the company reported adjusted earnings of $527.4 million or $4.91 per share, which surpassed the Zacks Consensus Estimate of $4.15 per share. CBI’s earnings improved 67.0% year over year.

Total Revenue & Contracts

Revenues for the quarter marked an impressive year-over-year increase of 95.1% to $3.0 billion. The rise was driven by healthy revenue growth across all the three legacy business units of CBI owing to increased demand for energy infrastructure, especially in the LNG, gas processing as well as oil and gas markets throughout the world.

The company’s acquired business units drove most of the revenue growth.

In 2013, new contracts totaled $12.3 billion (up 68.5% year over year), driven by new deals penned by the Engineering, Construction and Maintenance Segments. The company’s backlog also increased 155% to $27.8 billion from the prior-year quarter.

Segment Revenues

The company reported revenue growth across all four segments.

The Engineering, Construction and Maintenance segment’s revenues increased 95.2% year over year to $1.89 billion. About 72% of the increase was due to greater number of acquisitions.

The company’s oil and gas business unit reported healthy growth with significant revenue increase related to increased activities in LNG and gas processing work in the Asia-Pacific. The continuation of significant activities at CBI’s plant maintenance business as well as power and nuclear projects further drove revenues.

Fabrication Services reported fourth-quarter 2013 revenues of $698.0 million, which depicted a strong year-on-year increase of 64.4%. The rise was driven by robust domestic and international markets, which were strengthened by shale gas, petrochemical and LNG development.

Technology recorded revenues of $130.5 million, compared with $148.0 million in the prior-year quarter. The increase was driven by increased investment in the U.S. oil and gas sector, development of new technologies and strategic investments like E-Gas solid gasification technology.

Government Solutions segment reported revenues of $289.0 million or 10% of total revenue and an operating income of $4.3 million. This segment’s performance was aided by a large number of projects ranging from small environmental compliance projects to large engineering, procurement and construction (EPC) projects for the federal government. Despite the negative impact from sequestration, the segment benefited from opportunities in the areas of environmental protection, replacement of aging infrastructure and projects in the energy sector.

Margin

Gross profit for the quarter grew 71.6% year over to $339.2 million. Operating income was $210.4 million, up 52.0% year over year. The increase in operating profit was primarily driven by accretive acquisitions and higher revenues from the oil and gas as well as Fabrication services business units. However, operating profit margin fell 200 basis points due to change in volume mix of the legacy business units and acquisition costs.

Balance Sheet & Cash Flow

At quarter-end, the company had shareholders' equity of more than $2.5 billion, along with long-term debt of $1.6 billion. Cash flow from operating activities was negative $113.0 million compared with a positive $202.5 million in the prior-year quarter.

Exiting the quarter, the company had cash and cash equivalents of $420.5 million, down from $643.4 million in the prior-year quarter.

Outlook

Along with the earnings release, the company reaffirmed its guidance for full-year 2014. It expects revenues to be in the range of $12.6–$13.2 billion with adjusted earnings per share (EPS) in the band of $4.80 to $5.65.

Zacks Rank

CBI currently carries a Zacks Rank #4 (Sell).

Performance of Some Other Stocks in the Same Sector

Dycom Industries Inc. (DY - Analyst Report) recently reported second-quarter fiscal 2014 non-GAAP net income of $5.2 million or 15 cents per share, beating the Zacks Consensus Estimate of loss of 9 cents a share.

Quanta Services Inc. (PWR - Analyst Report) reported fourth-quarter 2013 non-GAAP earnings (excluding the one-time items) of 50 cents a share, beating the Zacks Consensus Estimate by 22%.

Fluor Corporation (FLR - Analyst Report) reported fourth-quarter 2013 net earnings of $167 million or $1.01 per share, beating the Zacks Consensus Estimate of 98 cents by 3.1%.

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