Chicago Bridge & Iron Wins Deal from Total Petrochemicals
Premium technology and infrastructure provider, Chicago Bridge & Iron Company N.V. CBI, recently announced that it has secured a contract from Total S.A.’s TOT subsidiary, Total Petrochemicals & Refining USA, Inc.
The contract, with an estimated worth of $1.3 billion, requires the company to provide engineering, procurement and construction services for a Port Arthur, TX-based ethane cracker project. Previously, Chicago Bridge & Iron had bagged a contract to provide front-end engineering, design services and ethylene technology license for this project.
With ethylene capacity of one million metric tons per year, this ethane cracker project is equipped with six SRT-III pyrolysis heaters. Total Petrochemicals is striving hard to capitalize on the abundance of shale gas in the U.S. It has plans to expand the global ethylene footprint and believes Chicago Bridge & Iron can help it realize operational synergies.
This ethane cracker project is the fourth major one clinched by the company on the U.S. Gulf Coast. Apart from the U.S., the company’s prospects in East Africa and the Middle East also look promising. For the U.S. and the Middle East, solid petrochemical investment on ethylene and low feedstock cost are projected to fuel growth. Investments in fossil power in the U.S. also bode well for the company.
Chicago Bridge & Iron had a shaky start in 2017, with shares losing 6.1% year to date, wider than the Zacks ategorized Building-Heavy Construction industry’s average decline of 4.4%. Arguably the company was counted among the leading beneficiaries of president Trump’s “Rebuilding America” program. However, it appears that the optimism regarding the stock, post the election of Donald Trump, is wearing out fast.
Going forward, we believe that sluggishness in the energy sector, which has undermined the company’s performance in the past few quarters, is unlikely to disappear anytime soon. Also, major divestures and restructuring are putting pressure on the balance sheet of this Zacks Rank #5 (Strong Sell) company. The escalating legal tension related to the sale of nuclear construction business to Westinghouse Electric might add to the company's burdens.
Further, the company’s earnings estimates also moved south over the past couple of months, indicating bearish analyst sentiment for the stock. Chicago Bridge & Iron has seen six downward estimate revisions compared to none upward, over the past 30 days. This has led the Zacks Consensus Estimate for 2017 to go from $4.55 to $4.15 per share.
Stocks to Consider
Better-ranked stocks in the broader sector include Dycom Industries, Inc DY and MasTec, Inc. MTZ. Both stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dycom has a positive average earnings surprise of 17.30% for the last four quarters, having beaten estimates all through.
MasTec boasts an average positive surprise of 54.4%, beating estimates each time over the trailing four quarters.
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