Chicago Bridge & Iron Company (CBI) shares in bullish "pennant" pattern

Posted Nov 26th 2007 2:38PM by Larry Schutts
Filed under: Earnings Reports, Analyst Upgrades and Downgrades, Technical Analysis, Stocks to Buy

Chicago Bridge & Iron Company (NYSE: CBI) is an engineering, procurement and construction firm. Projects include hydrocarbon processing plants, liquefied natural gas terminals and peak shaving plants, offshore structures, pipelines, bulk liquid terminals, and water storage and treatment facilities. The company serves the oil and gas, petrochemical and chemical, power, water and waste water, and metals and mining industries.

CB&I pleased investors late last month, when it reported Q3 EPS of 61 cents and revenues of $1.17 billion. Analysts had been expecting 46 cents and $1.11 billion. Management also guided FY07 EPS to $1.60-$1.75, versus consensus of $1.63. The CEO was positive about the impending acquisition of ABB's (NYSE: ABB) oil and gas production unit, Lummus Global. The transaction, which was completed last week, was expected to significantly enhance the firm's market position. BMO Capital Markets and Credit Suisse subsequently recommended the stock with an "outperform" rating. CBI shares popped on the earnings news and have since been consolidating the gain in a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers recommend the issue with three "strong buys," five "buys," two "holds" and two "sells." Analysts see a 35% growth rate, through the next year. The CBI PEG ratio (1.38), Price to Sales ratio (1.25), Price to Free Cash Flow ratio (24.55), Sales Growth rate (36.09%), EPS Growth rate (84.85%), Return on Assets (8.41%), Return on Investment (23.39%) and Return on Equity (27.13%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 87% of the outstanding shares. Over the past 52 weeks, the stock has traded between $25.79 and $56.49. A stop-loss of $44.50 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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