Chicago Bridge & Iron excels in storing value

Posted Feb 12th 2008 5:51PM by Joseph Lazzaro
Filed under: Stocks to Buy

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Chicago Bridge & Iron is worth an evaluation.

Chicago Bridge & Iron Company N.V. (NYSE: CBI) is a global, engineering, procurement, and construction company specializing in turnkey projects for customers that produce, process, store, and distribute the world's natural resources.

Analysts see strong 30-35% revenue growth in 2008 after a similar performance in 2007. Demand for crude oil terminal storage and process-related work in the U.S. should remain strong, including elevated water tanks and steel plate structures.

Labor costs are reasonable, with good overall cost containment. Margins are expected to increase in 2008. In general, analysts view CBI as well-positioned to take advantage of favorable market trends. The Reuters FY 2008/FY 2009 EPS consensus estimates for CBI are $1.76/$2.38.

The risks? Analysts are keeping an on CBI's order backlog and ability to win new orders for signs of a slowdown, particular in the energy sector.

The First Call mean rating for CBI is: Buy [14 firms]. Mean 2008 target: $61 [high: $72, low: $30].

Stock Analysis: Chicago Bridge & Iron is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from CBI's shares. Sell/Stop Loss if you were to purchase shares in this company: $26.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Tags: CBI, Chicago Bridge, construction services, energy, storage tanks