Chicago Bridge & Iron Company N.V. (NYSE:CBI)

smart

- CBI is Warren Buffett's new portfolio addition with 6,508,600 shares purchased at $53 per share on average.
- The holding is 0.48% of Berkshire's portfolio, and 6.15% of shares outstanding.
- Company had an annual average earnings growth of 20.7% over the past 10 years.
( source: nasdaq.com/article/warren-buffetts-berkshire-news-stakes-in-starz-and-chicago-bridge-iron-cm246467 )
( you can investigate the long term growth rates (up to10 yr.) here: financials.morningstar.com/ratios/r.html?t=CBI )
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From the S&P:

S&P Star Ranking = [4****]
(1=lowest, 5=highest)
- Our buy recommendation is based on our view of more favorable prospects in the emerging regions, and an expanded presence in the energy sector following the recent acquisition of Shaw Group. Our blended valuation metrics indicate the shares have further upside potential.
- Risks to our recommendation and target price include a decline in new project awards, fewer large projects, additional subcontractor labor costs and adverse weather, scarcity of engineering talent, a sustained slowdown in energy construction spending, a stronger U.S. dollar, and sharply lower oil prices.

S&P Fair Value Rank = [5]
(1=most overvalued, 5=most undervalued)

Fair Value Calculation = [$76.60]
Analysis of the stock's current worth, based on S&P's proprietary quantitative model suggests that CBI is Undervalued by $18.84 or 32.6%.

12-Mo. Target Price = [$70.00]
Our 12-month target price of $70 is based on a blend of two metrics. The stock recently traded at 13X our 2013 operating EPS estimate, a 10% discount to S&P Capital IQ's Construction & Engineering (C&E) group. With favorable trends in core markets, we apply a multiple of 16.5X to our 2013 operating EPS estimate, resulting in a $73 value. Our DCF analysis, assuming a weighted average cost of capital of 11.6% and terminal growth of 3%, indicates intrinsic value of $67.

Investability Quotient Percentile = [75%]
(1=lowest, 100=highest)
(The IQ is a measure of investment desirability. It serves as an indicator of potential medium-to-long term return and as a caution against downside risk. The measure takes into account variables such as technical indicators, earnings estimates, liquidity, financial ratios and selected S&P proprietary measures.)

Relative Strength Rank = [68]
(Shows, on a scale of 1 to 99, how the stock has performed versus all other companies in S&P's universe on a rolling 13-week basis.)

S&P Quality Ranking = [not ranked]

- We project close to 20% revenue growth for 2013, driven by increased activity for both large and small projects, and contributions from Shaw. In our view, customer spending will pick up for liquefied natural gas (LNG) in Asia/Pacific, the Middle East and Latin America, as well as in Russia and China, while the U.S. petrochemicals markets remain strong. Oil sands projects should continue to grow along with shale and other natural gas projects. CBI acquired Shaw Group in mid-February 2013.

- In our view, gross margins (before D&A) will narrow somewhat to about 12% in 2013, based on acquired projects and a mix shift toward the lower-margin construction phase of projects. We believe EBITDA margins in 2013 will benefit from well controlled SG&A expense (about 0.40 percentage point reduction seen), and better operating leverage, while execution and quality of backlog appear solid.

- We look for higher interest expense in 2013, with the effective tax rate rising to about 32% based on higher tax jurisdictions, and we estimate operating EPS of $4.40, increasing 17% to $5.15 in 2014.

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Sub-Industry Outlook (by S&P): POSITIVE:

We remain positive on our fundamental outlook for the construction & engineering sub-industry group, despite still uncertain global economic prospects, as we see a pickup in bookings for oil & gas, chemicals, infrastructure and other projects. New air emissions regulations should also drive backlog growth over the next few years.

Although the price of crude oil has retreated recently due to weaker than expected economic reports in the U.S. and China, it remains relatively high at above $90 a barrel. Oil prices remain well above the critical $60- to $70-a barrel level that oil companies budget for projects. At the current levels, we expect most projects to go ahead as planned, although the timing of new bookings will likely remain lumpy based on global uncertainties, especially in Europe. Additionally, potential federal spending cuts would limit certain projects. We see capital spending increasing for upstream drilling and exploration projects in the Canadian oil sands, and natural gas projects, while low gas prices continue to drive petrochemical projects. Meanwhile, acquisition activity should continue to strengthen due to low borrowing rates and favorable multiples. Chicago Bridge & Iron (CBI 51, Buy) acquired Shaw Group in early 2013 for more than $3 billion in cash and stock.

In our view, several major players should benefit from power generation projects, including coal-fired plants, oil & gas, and shale gas drilling primarily in Pennsylvania and Texas. However, we still see state and local government budget shortfalls impacting certain projects. In March 2012, the Senate passed a $109 billion two-year highway bill, following nine three-month highway funding stopgaps passed since the transportation law expired in 2009. Meanwhile, transportation budget cuts have eliminated spending for high-speed passenger rails. However, recent bond issues should benefit other transportation and public buildings projects, while the re-election of President Obama bodes well for environmental projects, in our view.

Year to date through April 12, the S&P Construction & Engineering Index was up 8.3%, versus the S&P 1500's 11.5% gain. Over the past 13 weeks, the group rose 4.3%, versus an 8% advance for the market index. With valuations well below historical levels and long-term prospects still robust, in our view, we think this above-average beta group will outperform the market over the next 12 months, led by those companies that are well diversified by geography and sector. The C&E Index recently traded at above 14X 2013's forecast, a modest discount to that of the market. We project EPS growth of 13% in 2013 and nearly 20% in 2014.

-- Stewart Scharf
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S&P Analyst Research Notes and other Company News:

May 2, 2013
05:46 pm ET ... S&P REITERATES BUY OPINION ON SHARES OF CHICAGO BRIDGE & IRON (CBI 53.63****): We keep our target price at $70, based on our relative and DCF metrics, equaling a premium-to-peers P/E of 16X our $4.40 operating EPS estimate for '13, based on positive prospects we see as it expands its energy infrastructure footprint with the recent Shaw Group acquisition. Q1 EPS of $0.82 before $0.50 charge, vs. $0.60, missed our estimate by $0.08 but beat the Capital IQ consensus by $0.07. CBI reaffirmed '13 guidance. Despite a recent postponed LNG project in Australia, we see favorable global trends in the energy sector, as total new awards rose 14% in Q1 to $1.95B.

-- Stewart Scharf

Buffett

Rating based on the purchase of the Shaw Group. A $3B purchase that in my opinion will turn out to be challenging. The reputation of the Shaw group speaks for itself.

Abundant supply of natural gas will require new infrastructure. CBI is a major player in this space

Building infrastructure for natural gas transportation.

Cbi is an awesome company. Contracts after contracts. Figure they m st make some damn hi quality stuff. Manf will always be needed eapecially at the top quality level due to increasingly harsh consequences of skimping where it matters. Though at this price ill also short this due to the market focusing on other indus whilst cbi keeps grinding. Big ups to the leaders as they seem to focus on their job at hand and not so much to the market and pressures. They just "do work"!

Infrastructure Giant should garner many new energy projects

Leading infrastructure play, increasingly going global.

Z-2

Decent PEG ratio, belied by an enterprise value-to-free cash flow ratio that's downright gorgeous. Chicago Bridge looks like the best way to play a resurgence in energy infrastructure construction.

ranked eighth of top world stocks in ibd. makes steel plate. 99 composite rating and 90 eps rating in ibd. located in amserdam, neth.

Earnings beat forecast significantly. Analysts raise forecasts. Sold off today

good solid company

27% earnings growth

Economic recovery...they build the big stuff..2 bagger thus far

Old Faithfull ... since it finished the horrid UK products, just keeps chugging alonh

global gains

Well positioned to benefit from the stimulus