On July 11, Zacks Investment Research upgraded Chicago Bridge & Iron (CBI) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Strong order activity coupled with rising demand for energy infrastructure, especially in the liquefied natural gas (LNG), gas processing and oil sands markets across the world, are expected to lead to a positive earnings surprise in the upcoming quarter.
The surge in shale gas revolution in North America and the recent approval from the U.S. Department of Energy (:DOE) for the export of LNG has created a strong opportunity and thereby a good market for Chicago Bridge & Iron. The company is benefiting from this potential in LNG market and has been receiving a steady inflow of orders from the world’s largest refineries and oil & gas facilities. The company’s order pipeline primarily comprises front-end engineering and design (FEED) analysis of key projects.
In addition, CBI is already an established niche player in the LNG market, supported by its ability to participate in multiple stages of development and strong base for investments. Given the potential surge in the manufacturing and export of LNG worldwide, CBI expects strong demand specifically for LNG/low temperature storage systems (petrochemicals), an area where Chicago Bridge & Iron plans to aggressively capture market share.
On May 6, 2013, CBI reported first quarter fiscal 2013 results, with earnings per share of 82 cents, down 20.4% from the Zacks Consensus Estimate of $1.03. However, earnings were up 36.7% year over year driven by strong project activities and robust backlog during the reported quarter.
Revenues for the quarter jumped 87.4% year over year to $2.3 billion, driven by the rising demand for energy infrastructure.
In the reported quarter, new awards totaled $1.95 billion (up 14.8% year over year), which increased the company’s backlog to $25.5 billion with a good mix of reimbursable and lump sum contracts.
On the heels of the strong first quarter results, earnings estimates trended higher in the past 60 days. The Zacks Consensus Estimate for fiscal 2014 climbed 0.4% to $5.17 per share. This represents year-over-year growth of 23.7%.
Other Stocks to Consider
Apart from Chicago Bridge & Iron, other stocks in the energy and construction sector that are currently performing well include Dycom Industries (DY) and Emcor Group Inc. (EME), both having a Zacks Rank #1 (Strong Buy). Pernix Group (PRXG) is another stock worth considering and it carries a Zacks Rank #2 (Buy).
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