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Chicago Bridge & Iron Poised to Gain as Trump Takes Office
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Since the U.S. Presidential elections results, shares of engineering, procurement and construction behemoth, Chicago Bridge & Iron Company N.V. , witnessed an impressive momentum on Donald Trump’s “Rebuilding America” rhetoric.
The stock has reacted favorably to Trump’s surprise victory, appreciating 19.6% over the past three months. This is better than the Zacks classified Building-Heavy Construction industry average of 17.9%. Notably, the company’s stock had plunged 17.5% in the first ten months of 2016 compared with the industry’s rally of 15.6%.
After two back-to-back misses, Chicago Bridge & Iron’s adjusted earnings of $1.20 per share beat estimates in the third quarter of 2016. Also, the company reiterated its full-year 2016 top- and bottom-line guidance in spite of the challenges faced. No doubt, this was instrumental in reassuring investors of the company’s prospects.
Here we highlight five key reasons which indicate that the stock has more room to run in 2017.
Why the Stock Should be in Your Portfolio
Estimates Revisions: The bullish sentiment of analysts regarding the Chicago Bridge & Iron stock is evidenced by the upward estimate revisions over the last seven days.The stock witnessed the Zacks Consensus Estimate for fiscal 2016 earnings edging up from $4.81 to $4.82 over the same time frame. While it has seen one upward estimate revision, none of the estimates have moved lower.
Impressive ROE: Chicago Bridge & Iron’s Return on Equity (ROE) ratio is 22.5% over the past five years. This is ahead of the industry average of 14.5%. This is one of the paramount profitability metrics of any company, reflecting that it reinvests more efficiently than its peers.
Undervalued: With respect to PEG ratio and Price to Sales (“P/S”) ratio, Chicago Bridge & Iron looks relatively undervalued. The company’s PEG ratio of 0.50 is below the industry average of 1.30. This ratio compares the P/E to its growth rate. Also, the company has a P/S ratio of 0.31 compared to 0.54 of the industry. These indicate that the stock has a strong upside potential.
Overall, the company carries value score of B, which implies that the stock is reasonably valued. The Value Style Score is a comprehensive measure that combines all valuation metrics into one actionable score. This is a key measure that helps investors avoid ‘value traps’ and pick stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’, when combined with Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Gains from Change in Administration: Market pundits believe that the company is favorably positioned to reap the benefits of Trump’s “Rebuilding America” initiatives, once he takes office. The President-elect has hinted toward a multi-billion dollar spending program to build bridges, roads, and railroads in America.
Buoyed by these announcements, the company’s Engineering and Construction segment is likely to witness a surge in major infrastructure projects, including liquefied natural gas terminals, electric power plant projects, and drinking and wastewater pipeline works. Also, Trump’s intention to revamp the country’s aging water infrastructure is expected to be conducive to the company’s energy and water transport business.
Other Catalysts: An uptick in storage and pipe fabrication awards around the world and significant opportunities in petrochemicals and refining are expected to act as key catalysts, going forward. On a geographic basis, positive industry trends in China, Southeast Asia, India, the U.S., and Russia are expected to stoke growth of refining and petrochemicals business.
Moreover, Chicago Bridge & Iron’s diversified portfolios coupled with positive trends add to its strength. Also, the company is making concerted efforts to reinvent its supply chain to generate greater returns than the typical margins associated with engineering and construction projects. Diligent execution of strategies, restructuring and cost-saving initiatives culture further signals better profitability, going forward.
KBR, which operates as an engineering, construction, and services company worldwide, has an average positive earnings surprise of 3.9%, for the trailing four quarters, beating estimates twice.
Building materials manufacturer, Louisiana-Pacific Corporation, has a average surprise of 98.5%, beating estimates thrice over the trailing four quarters.
Infrastructure engineering and construction company MasTec has managed to beat earnings each time over the trailing four quarters. It has a positive average surprise of 61.3%.
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Chicago Bridge & Iron Poised to Gain as Trump Takes Office
Since the U.S. Presidential elections results, shares of engineering, procurement and construction behemoth, Chicago Bridge & Iron Company N.V. , witnessed an impressive momentum on Donald Trump’s “Rebuilding America” rhetoric.
The stock has reacted favorably to Trump’s surprise victory, appreciating 19.6% over the past three months. This is better than the Zacks classified Building-Heavy Construction industry average of 17.9%. Notably, the company’s stock had plunged 17.5% in the first ten months of 2016 compared with the industry’s rally of 15.6%.
After two back-to-back misses, Chicago Bridge & Iron’s adjusted earnings of $1.20 per share beat estimates in the third quarter of 2016. Also, the company reiterated its full-year 2016 top- and bottom-line guidance in spite of the challenges faced. No doubt, this was instrumental in reassuring investors of the company’s prospects.
Here we highlight five key reasons which indicate that the stock has more room to run in 2017.
Why the Stock Should be in Your Portfolio
Estimates Revisions: The bullish sentiment of analysts regarding the Chicago Bridge & Iron stock is evidenced by the upward estimate revisions over the last seven days.The stock witnessed the Zacks Consensus Estimate for fiscal 2016 earnings edging up from $4.81 to $4.82 over the same time frame. While it has seen one upward estimate revision, none of the estimates have moved lower.
Impressive ROE: Chicago Bridge & Iron’s Return on Equity (ROE) ratio is 22.5% over the past five years. This is ahead of the industry average of 14.5%. This is one of the paramount profitability metrics of any company, reflecting that it reinvests more efficiently than its peers.
Undervalued: With respect to PEG ratio and Price to Sales (“P/S”) ratio, Chicago Bridge & Iron looks relatively undervalued. The company’s PEG ratio of 0.50 is below the industry average of 1.30. This ratio compares the P/E to its growth rate. Also, the company has a P/S ratio of 0.31 compared to 0.54 of the industry. These indicate that the stock has a strong upside potential.
Overall, the company carries value score of B, which implies that the stock is reasonably valued. The Value Style Score is a comprehensive measure that combines all valuation metrics into one actionable score. This is a key measure that helps investors avoid ‘value traps’ and pick stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of ‘A’ or ‘B’, when combined with Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Gains from Change in Administration: Market pundits believe that the company is favorably positioned to reap the benefits of Trump’s “Rebuilding America” initiatives, once he takes office. The President-elect has hinted toward a multi-billion dollar spending program to build bridges, roads, and railroads in America.
Buoyed by these announcements, the company’s Engineering and Construction segment is likely to witness a surge in major infrastructure projects, including liquefied natural gas terminals, electric power plant projects, and drinking and wastewater pipeline works. Also, Trump’s intention to revamp the country’s aging water infrastructure is expected to be conducive to the company’s energy and water transport business.
Other Catalysts: An uptick in storage and pipe fabrication awards around the world and significant opportunities in petrochemicals and refining are expected to act as key catalysts, going forward. On a geographic basis, positive industry trends in China, Southeast Asia, India, the U.S., and Russia are expected to stoke growth of refining and petrochemicals business.
Moreover, Chicago Bridge & Iron’s diversified portfolios coupled with positive trends add to its strength. Also, the company is making concerted efforts to reinvent its supply chain to generate greater returns than the typical margins associated with engineering and construction projects. Diligent execution of strategies, restructuring and cost-saving initiatives culture further signals better profitability, going forward.
Other Stocks to Consider
Some other stocks to be considered by investors include KBR, Inc. (KBR - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) and MasTec, Inc. (MTZ - Free Report) . Each of them carries the same Zacks Rank as Chicago Bridge & Iron. You can see the complete list of today’s Zacks #1 Rank stocks here.
KBR, which operates as an engineering, construction, and services company worldwide, has an average positive earnings surprise of 3.9%, for the trailing four quarters, beating estimates twice.
Building materials manufacturer, Louisiana-Pacific Corporation, has a average surprise of 98.5%, beating estimates thrice over the trailing four quarters.
Infrastructure engineering and construction company MasTec has managed to beat earnings each time over the trailing four quarters. It has a positive average surprise of 61.3%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>