We expect engineering construction company Chicago Bridge & Iron (CBI) to beat expectations when it reports first quarter 2013 results on May 2.
Why a Likely Positive Surprise?
Our proven model shows that Chicago Bridge is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 1.33%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the stock.
Zacks #3 Rank (Neutral): We note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Chicago Bridge’s Zacks Rank # 2 (Buy) and +1.33% ESP makes us very confident in looking for a positive earnings beat on May 2.
What is Driving the Better Than Expected Earnings?
Strong order activity coupled with rising demand for energy infrastructure, especially in the LNG, gas processing and oil sands markets across the world are expected to lead to a positive earnings surprise in the upcoming quarter.
The positive trend is seen in the trailing four-quarter average surprise of 1.14%, which was greatly helped by the 9.6% surprise in the last-reported quarter. This was possible because Chicago Bridge had a robust quarter in terms of backlogs and orders. In addition, revenue growth across three of the company’s operating segments along with strong license sales also helped.
Other Stocks to Consider
Chicago Bridge is not the only company looking up this earnings season. Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
- Orion Marine Group Inc. (ORN) with an Earnings ESP of +25.00% and Zacks #1 Rank (Strong Buy)
- ITT Corporation (ITT) with an Earnings ESP of +4.65% and Zacks #2 Rank (Buy)
- KBR Inc.(KBR) with an Earnings ESP of +1.79% and Zacks #3 Rank (Hold)
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