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Chicago Bridge & Iron Clinches $40M Contract from DuPont

Zacks Equity Research

Chicago Bridge & Iron Company N.V. CBI recently announced that it has clinched a contract worth approximately $40 million from U.S.-based chemical behemoth, E. I. du Pont de Nemours and Company (DuPont).

Per the contract, the premium technology and infrastructure services provider will offer engineering, procurement and construction services for expanding DuPont's Sabine River Works ethylene plant in Orange, TX. Leveraging on the company’s proprietary Short Residence Time pyrolysis heater technology, the new cracking furnace will boast an ethylene capacity of 200 million pounds per year.

Chicago Bridge & Iron remains confident that its state-of-the-art solutions will help Du Pont to fortify its ethylene copolymers portfolio in a cost-effective and low-risk manner. Previously, the company had secured a contract from DuPont to provide an ethylene technology license and engineering services for the furnace.

The recent award marks another major win for Chicago Bridge & Iron in the U.S. Gulf Coast, where it has managed to win a couple of major awards in the past few months. The most notable among them is the $1.3 billion ethane cracker project secured from Total Petrochemicals & Refining USA, Inc., a subsidiary of Total S.A. TOT. It was the fourth major one clinched by the company on the U.S. Gulf Coast. These contracts are likely to provide the much-needed boost to the company’s waning top line and cash flow.

Over the past couple of years, Chicago Bridge & Iron has been grappling with a host of macroeconomic issues, which has affected its financials. Like most other companies operating in the energy domain (particularly oil and gas sector), volatility in commodity pricing continues to be a major drag for its profitability. Precipitous decline in capital investments poses as a major threat.

Over the past six months, Chicago Bridge & Iron’s shares have plunged 61.5%, far wider than the average loss of 13.7% recorded by the Zacks classified Building Products-Heavy Construction industry. Taking into consideration the company’s drab guidance during first-quarter 2017 results and the $2 billion legal spar with Westinghouse, we believe the stock will continue to slump hard on the bourse, at least in the short-term.

The analysts are showing no favor toward the Zacks Rank #5 (Strong Sell) stock at present. Chicago Bridge & Iron has seen six downward estimate revisions compared with none upward over the past couple of months. This has led the Zacks Consensus Estimate for full-year 2017 to move down from $4.15 to $3.41, underlining a decline of 17.8%. This reflects decidedly bearish analyst sentiment.

Top Picks

Some top picks in the broader sector include TopBuild Corp. BLD and EMCOR Group, Inc. EME. While TopBuild sports a Zacks Rank #1 (Strong Buy), EMCOR holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TopBuild has a positive average earnings surprise of 6% for the last four quarters, having beaten estimates three times.

EMCOR has a robust earnings surprise history, with an average positive surprise of 15.5%, having beaten estimates thrice in the trailing four quarters.

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