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Chicago Bridge & Iron Wins Storage Project in Central Asia


Engineering, procurement and construction behemoth, Chicago Bridge & Iron Company N.V. CBI, recently declared that it has secured a contract worth approximately $50 million for a storage project in Central Asia.

Chicago Bridge & Iron’s work will include the engineering, fabrication and construction of nine flat bottom tanks. This continues a long-working relationship as the company has provided storage tanks to this customer for several years.

Recently, the company also clinched a contract from Xuzhou HaiDing Chemical Technology Co. Ltd. for the license and engineering design of a grassroots propane dehydrogenation unit to be constructed in Pizhou, China. In the previous month, the company won technology contracts from four PetroChina refineries for the license, engineering design and proprietary equipment supply for an alkylation unit at each of the four sites. The company also secured a contract from Técnicas Reunidas, S.A. for new product storage tanks for Saudi Aramco's refinery in Ras Tanura, Saudi Arabia.

However, despite such lucrative contract wins, Chicago Bridge & Iron has been in troubled waters, of late. In recent times, reduced activities on its large cost-reimbursable LNG projects in the Asia-Pacific region and the winding down of several other E&C projects have impacted the revenues negatively.

Over the past few quarters, the company suffered a precipitous decline in capital investments, severely marring its financials. Volatile commodity pricing have proven to be one of the major concerns for Chicago Bridge & Iron. Investors are abandoning the stock in droves, in light of the recent miserable guidance and a dividend suspension that the company announced along with its most recent quarterly results. The stock has lost 54.1% of its value year to date, in stark contrast to the industry’s gain of 14.7%.

Chicago Bridge & Iron reported a colossal loss in second quarter 2017 results, as the top line contraction, escalating operating expenses and higher interest costs hurt the bottom line. Further, the Zacks Rank #5 (Strong Sell) company also discontinued paying dividends. The step reflects severe balance-sheet weakness, as the company stated that the dividend cut was necessary to satisfy creditors and ensure compliance with certain debt covenants at end of June.

The company’s margins were badly hurt by rising costs in two gas turbine projects and two LNG export facility projects. Lower-than-expected labor productivity, elevated costs for fabrication, and craft labor as well as weather-related delays were responsible for the cost overruns. Moreover, foreign exchange fluctuations are expected to be a formidable headwind going ahead.

Stocks to Consider

Some better-ranked stocks from the same space are MasTec, Inc. MTZ, Sterling Construction Company Inc STRL and EMCOR Group, Inc. EME. While MasTec and Sterling Construction sport a Zacks Rank #1 (Strong Buy), EMCOR Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MasTec has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 29.7%.

Sterling Construction has outpaced estimates twice in the preceding four quarters, with an average earnings surprise of 47%.

EMCOR Group has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 11.7%.

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