CB&I Outperforms Estimate

Chicago Bridge & Iron Company N (CBI - Analyst Report) reported third-quarter 2011 earnings per share of 72 cents, beating the Zacks Consensus Estimate of 65 cents and prior-year earnings of 52 cents. The company delivered a solid quarterly performance.

Total Revenue & Order

The top-line figure was up by 38% to $1.3 billion, as the company benefitted from the rising demand worldwide for energy infrastructure, especially in the LNG, gas processing and oil sands markets.

Australia was a major source of new awards for CB&I. Of the total new awards of $3.8 billion bagged by the company, $2.3 billion was from the Gorgon project in Australia, $500 million from an Australian LNG project, contributions from the Arrow LNG project in Australia as well as $60 million from storage tank contract in Saudi Arabia. Total Backlog at the end of the quarter was $9.3 billion, up from $6.9 billion at year-end 2010.  

Segment Revenue

CB&I Steel Plate Structures revenue was $511.4 million compared with $348.7 million in the third quarter of 2010. CB&I Lummus revenue was $630.0 million compared with $471.1 million and Lummus Technology revenue was $114.0 million compared with $89.4 million.

Margin

Operating margin in the quarter was 7.4% compared with 8.6% in the third quarter of 2010.

Segment wise operating margin was 8.5% for CB&I Steel Plate Structures segment compared with 9.1% in the third quarter of 2010, 3.6% for CB&I Lummus segment compared with 4.2% and 23.6% for Lummus Technology segment compared with 29.6%.

Balance Sheet & Cash Flow

Cash and cash equivalents were $540 million at the end of the quarter with long-term debt of $40 million and shareholders equity of $1.19 billion.

Operating cash flow for the quarter was $189.1 million compared with $87.2 million in the prior-year period.

Outlook

The company updated its 2011 earnings per share guidance to $2.40 to $2.50. Revenue and new awards guidance was maintained at $ $4.3 billion to $4.7 billion and $6.8 billion to $7.2 billion, respectively. Moving ahead, the company is all set to drive substantial benefit in its LNG, gas processing and oil sands markets as these continue to witness rising demand for energy infrastructure. A sound financial position, good grip on the market as well as operational strength favor the company to meet its target for 2011 and beyond.

However, the business is dependent upon major construction projects from clients, the unpredictable timing of which may result in significant fluctuations in cash flow and earnings due to timing between the award of the project and payment under the contract. A major competitor of CB&I is Matrix Service Co. (MTRX - Snapshot Report).

Chicago Bridge & Iron Company N.V. was founded in 1889.  It has a global network of some 80 sales and operations offices, which are staffed by around 17,000 employees.  During 2007, CBI executed more than 500 projects in over 60 countries.  The company segments its operations into four broad market sectors: Liquefied Natural Gas (LNG), Energy Processes, Steel Plate Structures, and Lummus Technologies.

We maintain a Zacks #4 Rank (short-term Sell recommendation) on Chicago Bridge & Iron Company N.

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