Saturday, May 4, 2013

Chicago Bridge and Iron Earnings

Chicago Bridge and Iron reported earnings on May 2nd, 2013 after the market closed. Earnings beat consensus by reporting an EPS of $.82, up 12.8% against expected earnings. Revenue was reported at $2.3 billion, higher than consensus of $2.18 billion and a surprise of 5%.

Safety has been a priority of CBI and they have shown excellence in this field, with not a single fatality having occurred in over 2.5 years. CBI showed improvement and growth in essential components this past quarter, highlighted by their Lummus technology. Lummus technology, the main revenue driver, posted an annual record of $727 million in revenue, up 35% on the year-over-year. With projects being awarded in the fourth quarter including Aramco storage tanks and spheres in Saudi Arabia, technology awards from Shell in Singapore and West Lake in the US, backlog is continuously increasing. With the purchasing of Shaw Group on February 13th, the company is looking to restructure and completely integrate the environmental and plant services that Shaw provided.

For the future, Lummus technology looks to continue to be a main contributor to revenue growth. If awards are going to be continuously given to Lummus, it could be contributing over $1 billion annually. CBI closed on Friday at $55.22, up 2.96% on the day after being marginally down in after-hour trading following earnings being released. With a strong backlog and a possibility of awards coming in that could return up to $10 billion annually, I reiterate our BUY rating for Chicago Bridge and Iron.

- Peter Rodrigues Industrial Junior Analyst

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