Chicago Bridge & Iron Company N.V. (CBI): This Stock Is Set To Skyrocket

Page 1 of 2

Editor’s Note: The initial article stated Shaw was based in Canada. That was incorrect, this version has been corrected.

In a bid to arrest its widening trade deficit and support natural gas pricing, the United States Department of Energy (DOE) recently relaxed its norms for LNG exports. It has authorized Freeport’s LNG terminal to export up to 1.4 bcf of natural gas/day for the next 20 years, to countries like India that do not have free trade agreements. But Freeport’s LNG export terminal has to be expanded before it can process such large shipments. This presents a bullish case for Chicago Bridge & Iron Company N.V. (NYSE:CBI).

Chicago Bridge & Iron Company N.V. (NYSE:CBI)

Why CB&I

Chicago Bridge & Iron Company N.V. (NYSE:CBI) is one of the leading energy-focused engineering and construction companies on the globe. It has been in business since 1889, and specializes in LNG exports along with petrochemical and natural resources industries.

It is due to its solid reputation that the expansion project (FEED contract) of the Freeport liquefaction plant has been jointly awarded to Chicago Bridge and Zachry Industrial. The overall project cost is estimated to be around $10 billion, and analysts at BB&T believe that Chicago Bridge could rake in between $3-$4 billion in revenues from it.

Since its order backlog currently stands at $25.5 billion, a project addition of this magnitude should fatten its order book by 1%2-16%, which will eventually add $126-$168 million to its annual net earnings (estimated). This is one of the reasons why the Street is bullish on the company.

A Strategic Acquisition

Another catalyst for Chicago Bridge & Iron Company N.V. (NYSE:CBI) is its recent acquisition of Shaw Group for $3 billion. It is a leading engineering and construction company based in Louisiana, which has added another vertical in Chicago Bridge & Iron Company N.V. (NYSE:CBI)’s portfolio. Apart from opening up new markets, the acquisition has diversified its business and added stability to its revenues.

Furthermore, its order backlog of $10.9 billion in Q1 FY12 ballooned to $25.5 billion Q1 FY13 (post acquisition). But there has been an industry-wide stagnation of new orders. Fluor Corporation (NEW) (NYSE:FLR)’s order backlog of $42.5 billion in Q1 FY12 shrank to $37.5 billion in Q1 FY13. Even KBR, Inc. (NYSE:KBR)’s order backlog of $14.2 billion in Q1 FY13 shrank by $716 million YoY.

Hence Chicago Bridge & Iron Company N.V. (NYSE:CBI)’s inorganic expansion and order book expansion, will most likely allow it to grow faster than its peers. This is corroborated by their respective EPS growth estimates.

Company Forward P/E PEG Net Margin EPS growth next 5yr
Fluor Corporation 12.85x 1.76x 1.6% 12.16%
KBR 10.29x 2.89x 1.8% 12%
Chicago Bridge 11.67x 0.98x 4.2% 21.63%

Numbers game

From the table above it’s evident that shares of Chicago Bridge & Iron Company N.V. (NYSE:CBI) are deeply undervalued, despite its recent rally. Furthermore its net profit margins are the highest amongst its mentioned peers, which eventually yields a high ROE ratio of 18.9%.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!