New Orders, Good Acquisitions, and Galloping Earnings—It’s a Buy!

03/27/2013 9:45 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

This company, solid proof of America's economic recovery, is just destroying analyst estimates this year, writes Michael Cintolo of Cabot Top Ten Trader.

Not surprisingly, my stock idea today is one of the liquid leaders, but it’s one that few investors are aware of.

Chicago Bridge & Iron (CBI) is a leading engineering and construction firm for major projects worldwide. I’m not talking about commercial real estate or anything like that; CBI designs and builds things like liquefied natural gas facilities, steel plate structures, and petrochemical structures.

Normally, this is a solid business with some ups and downs along the way. But for whatever reason, Chicago Bridge & Iron is firing on all cylinders now, bringing in a ton of new orders (lots in the energy and chemical fields). Most important, its recent acquisition of peer Shaw Group could be transformational.

In the most recent quarter, it beat estimates on both sales (up 22%) and earnings (up 30%), and it exited the year with an $11 billion order backlog, thanks to a whopping $7.3 billion of new deals won last year (including $2.8 billion in the fourth quarter alone). For comparison, the company brought in $5.5 billion in revenue last year.

All of this could be just the tip of the iceberg. Once Shaw is completely integrated, the company’s backlog should be north of $20 billion, and that should include a well-diversified mix of projects by geography, industry, and contract type.

That’s one reason earnings estimates have moved up sharply. Analysts see the company earning about $4 per share this year, up 30% from last year, whereas their expectations were for just $3.50 a couple of weeks ago. In 2014, the bottom line should rise another 20%, which isn’t bad for a stock trading at just 19 times trailing earnings.

What really impresses me about CBI is its chart—it remains in a firm uptrend, having kited higher with hardly any weakness since mid-November, hitting new all-time highs after a multi-month consolidation.

It did pull back normally during the market’s February weakness, but it quickly regained all of its lost ground and more, hitting new highs last week. It barely hiccupped from the Cyprus news over the weekend.

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