Chicago Bridge & Iron Company N.V. (CBI) posted first-quarter adjusted earnings of $94.4 million or $0.87 per share (excluding one-time items), 22.3% below the Zacks Consensus Estimate of $1.12 per share. Adjusted net income, however, improved 12% year over year on the back of strong project activities during the quarter.
Increased backlog levels, growing demand for energy across the globe, CBI’s unique business model and its diligent operational execution, while focusing on safety, are the key drivers behind the company’s year-over-year profit.
Total Revenue & Contracts
Revenues for the quarter marked an impressive year-over-year increase of 30% to $2.93 billion. The rise was driven by healthy revenue growth across all the three legacy business units of CBI owing to increased demand for energy infrastructure, especially in the Liquefied Natural Gas (LNG), gas processing as well as oil and gas markets throughout the world.
In the first quarter of 2014, new contracts totaled $5.7 billion (up 198% year over year), driven by new deals penned by the Engineering, Construction and Maintenance segment.
The company reported revenue growth across all four of its segments.
The Engineering, Construction and Maintenance segment’s revenues increased 393% year over year to $4.9 billion. The increase was brought about primarily by a greater number of acquisitions.
The company’s oil and gas business unit reported healthy growth with significant revenue increase related to increased LNG and gas processing activity in the Asia-Pacific region. The continuation of significant activities at CBI’s plant maintenance business as well as power and nuclear projects further drove revenues.
Fabrication Services reported first-quarter 2014 revenues of $493.9 million, declining 31% year on year. The decline was due to customer delays which resulted in underutilization of the company’s pipe fabrication capacity.
Technology recorded revenues of $144 million, compared with $151.4 million in the prior-year quarter. The decline in revenues was due to temporary issues.
The Environmental Solutions segment reported revenues of $184.9 million. This segment’s performance was aided by a large number of projects ranging from small environmental compliance projects to large engineering, procurement and construction (:EPC) projects for the federal government.
Gross profit for the quarter grew 23% year over year to $301.4 million. Operating income was $162.4 million, up 88% year over year. The increase in operating profit was primarily driven by accretive acquisitions and higher revenues from the oil and gas as well as Fabrication services business units. Operating profit margin also increased 200 basis points.
Balance Sheet & Cash Flow
At quarter-end, the company had shareholders' equity of more than $2.6 billion, along with long-term debt of $1.6 billion. Cash flow from operating activities was a negative $145.7 million as against a positive $312 million in the prior-year quarter.
Exiting the quarter, the company had cash and cash equivalents of $420.5 million, down from $643.4 million in the prior-year quarter.
CBI currently has a Zacks Rank #3 (Hold). Some better-raked stocks in the sector are VSE Corp. (VSEC), Willdan Group (WLDN) and India Globalization Capital Inc. (IGC). All three carry a Zacks Rank #2 (Buy).