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What Warren Buffett Likes About Chicago Bridge & Iron Company N.V. (CBI)

At the time of the deal, the combined company had a $28 billion order backlog of projects in the oil, gas and electrical industries.

The pick falls in line with Buffett’s aim of finding companies that are at the center of the recovering U.S. economy and stand to perform well over the long run. In coming years, utilities are expected to spend billions of dollars building new power plants and retrofitting coal burning plants to meet stricter anti-pollution regulations. That bodes well for Chicago Bridge & Iron Company N.V. (NYSE:CBI) indeed.

Competitor Caterpillar Inc. (NYSE:CAT) creeping along

Chicago Bridge & Iron’s rosy outlook is in contrast to that of colleague Caterpillar Inc. (NYSE:CAT). In fact, Caterpillar currently looks like a sleepy dog.

The company missed on Q1 earnings and revenue, and cut its full year outlook to reflect a drop in demand for heavy equipment from its mining customers. Earnings came in at $1.31 per share, down from $2.37 per share in the same quarter a year ago. Revenue tumbled to $13.21 billion from $15.98 billion.

This year’s full sales outlook was revised downward to a range of $57 billion to $61 billion. The disappointing quarter and guidance came on the heels of an 11% layoff of its workforce at an Illinois plant that makes mining equipment.

Caterpillar Inc. (NYSE:CAT) said it had 11,000 fewer people working for it at the end of Q1 2103 than a year ago.

Shares swooned after the company reported a sharp drop in sales to its worldwide network of dealers. Certainly not a good sign for the bellwether. Shares look cheap at a P/E of 11.80, and long-term sentiment remains optimistic. But for the near term, shares look rocky.

Caterpillar Inc. (NYSE:CAT) remains 6.3% lower so far in 2013, compared to the Dow’s gain of more than 15%. Plus, the shares trade well below its 10-month and 20-month moving averages.

Looking ahead

Meanwhile, there is nothing average looking about Chicago Bridge & Iron.

CBI President and CEO Phillip K. Asherman applauded the “robust accretion of the Shaw acquisition” and anticipates continuing demand around the world for energy infrastructure will drive full year and future profits.

The company fits value investor Buffett’s criteria for an investment: strong fundamentals, solid business and plenty of potential.

One of the most difficult things for an investor is deciding which bridges to cross and which to burn. A position in Chicago Bridge & Iron can bridge a gap in most any portfolio.

The article What Warren Buffett Likes About Chicago Bridge & Iron originally appeared on Fool.com is written by Diane Alter.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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