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Chicago Bridge & Iron Secures Venture Global LNG Contract

Chicago Bridge & Iron Company N.V. CBI recently secured a contract with Venture Global LNG, for the engineering, procurement and construction of two LNG storage tanks, for the latter's Calcasieu Pass export facility in Southwest Louisiana. The contract is valued at almost $200 million.

Venture Global is a U.S.-based liquefied natural gas (“LNG”) export company, which intends to become a long-term, low-cost producer of LNG. Chicago Bridge & Iron boasts an impressive track record of executing LNG storage projects both in the U.S. Gulf Coast region and across the world, and Venture Global is looking to capitalize on the same.

Venture Global's Calcasieu Pass is projected to produce 10.0 million tonnes per annum of cost-competitive LNG supply. Chicago Bridge & Iron will offer two single-containment LNG storage tanks for the same, on a turn-key basis. Construction of the tanks is likely to commence in 2018.

Just last week, Chicago Bridge & Iron secured a multi-technology contract with Shurtan Gas Chemical Complex LLC, which involves a grassroots ethylene complex to be built in southern Uzbekistan. The company also clinched a $40 million contract from U.S.-based E. I. du Pont de Nemours and Company, for offering engineering, procurement and construction services for DuPont's Sabine River Works ethylene plant in Orange, TX.

The above mentioned contracts are likely to provide the much-needed boost to the company’s waning top line, which has been hurt recently owing to reduced activity on its large cost-reimbursable LNG projects in the Asia-Pacific region, as well as the winding down of several other E&C projects.

The company did receive a significant reprieve as the Delaware Supreme Courtruled in favor of Chicago Bridge & Iron last Tuesday, in relation to a lawsuit connected to Westinghouse Electric Co.’s 2015 acquisition of the former’s Shaw nuclear construction business. The ruling effectively took a $2 billion overhang off Chicago Bridge & Iron.

However, the fact remains that over the past few quarters, the company suffered a precipitous decline in capital investments, severely marring its financials. Volatile commodity pricing and prolonged softness in the energy markets have proven to be major concerns for Chicago Bridge & Iron.

These headwinds were underlined harshly in the company’s latest quarterly numbers. Its earnings missed estimates by a colossal 75%. Also, revenues dropped over 11% year over year, displaying broad-based weakness.

On account of these factors, the company’s shares have slumped hard over the past one year, plummeting 45.7% — against the Zacks categorized Building Products - Heavy Construction industry’s average gain of 13.8%.

Overall, the company has a bleak earnings surprise history, with three misses in the trailing four quarters, resulting in an average negative surprise of 29.7%. The analyst community is showing no favor toward the company either. The Zacks Consensus Estimate for full-year 2017 earnings continues to go south, reflecting decidedly bearish analyst sentiment.

This Zacks Rank #4 (Sell) company witnessed six downward estimate revisions compared to none upward, over the past couple of months. This led the Zacks Consensus Estimate for 2017 to move down from $4.15 to $3.33 — a 19.8% decline.

Chicago Bridge & Iron Company N.V. Price and Consensus

Stocks to Consider

Some better-ranked stocks in the broader sector include TopBuild Corp. BLD, Masco Corporation MAS and Weyerhaeuser Co. WY. While TopBuild sports a Zacks Rank #1 (Strong Buy), Armstrong World Industries and Weyerhaeuser carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TopBuild has a positive average earnings surprise of 6% for the last four quarters, having beaten estimates thrice.

Masco has a decent earnings surprise history, with an average positive surprise of 3.5%, having beaten estimates twice over the trailing four quarters.

Weyerhaeuser has an average positive surprise of 1.3%, beating estimates twice for as many misses over the trailing four quarters.

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