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Chicago Bridge & Iron (CBI) Secures a Contract Worth $200M


Global engineering, procurement and construction conglomerate Chicago Bridge & Iron Company N.V. CBI secured a contract with Puget Sound Energy Inc. for the engineering, procurement, fabrication and construction of a multi-purpose Liquefied Natural Gas (“LNG”) storage and fueling terminal situated in Tacoma, Washington. The contract is valued at over $200 million.

The contract calls for work on a 30,000 cubic meter full containment storage tank, liquefier and vaporizer. The multi-purpose storage and fueling facility will be equipped with peak shaving, marine bunkering and truck loading capabilities.

Chicago Bridge & Iron has rich experience in working with all aspects of the LNG industry, and its capabilities will help Puget Sound Energy deliver reliable, inexpensive natural gas service to transportation companies as well as residential & commercial customers.

This is the third major contract that the company has secured in the fourth quarter. Last month, Chicago Bridge & Iron won a five-year contract renewal valued at about $350 million for maintenance, turnarounds and capital construction for a major refinery in the Midwest. Further, it also signed a long-term alliance agreement with Haldor Topsoe, a leading catalyst and technology provider, which will serve to expand Chicago Bridge & Iron's licensing position for syngas opportunities. We believe that such contract wins highlight the resiliency of the company in tough economic times.

CHICAGO BRIDGE Price and Consensus

Going forward, Chicago Bridge & Iron has some promising opportunities in several of its business lines that bode well for long-run growth. Particularly, the company’s Engineering & Construction segment has been benefiting from federal funding allocations and increasing scope for LNG mechanical erection projects in the Asia-Pacific region.

However, in spite of such lucrative contract wins, Chicago Bridge and Iron’s near-term prospects look bleak owing to broader macroeconomic issues. Over the recent months, the company witnessed a significant decline in capital investments which has severely marred its financials.

In fact, in its recently reported third quarter 2016 results, revenues from its Engineering and Construction segment declined 14.7% on a year-over-year basis. New awards in this segment also fell 38% from the comparable quarter last year.

The current softness in client spending and deferral of capital investment decisions could prove to be a major headwind for this Zacks Rank #3 (Hold) company, going forward.

Other Stocks to Consider

Some other stocks in the broader construction sector include Simpson Manufacturing Co., Inc. SSD, Gibraltar Industries, Inc. ROCK acnd MasTec, Inc. MTZ.

Simpson Manufacturing designs, engineers, manufactures, and sells building construction products. The company has a striking earnings surprise history for the trailing four quarters, having beaten estimates in each of them, for an average of 18.8%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gibraltar Industries also boasts a Zacks Rank #1 and is a leading manufacturer and distributor of building products. The company has a striking earnings history, with a remarkable average positive surprise of 67.3% for the trailing four quarters, driven by four robust beats.

MasTec, an infrastructure construction company, carries a Zacks Rank #2 (Buy). It has registered a remarkable positive average surprise of over 61.3% in the four trailing quarters, beating estimates all through.

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