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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!