For Shaw Group, the developing world is a lucrative world

Posted May 14th 2008 5:15PM by Joseph Lazzaro
Filed under: Stocks to Buy

Readers of this space know that in addition to oil / oil services, one of my preferred sectors is: infrastructure / public services. That's because despite the U.S. economic slowdown, global growth proceeds at a better-than-adequate pace, with infrastructure work playing a significant role. And with the aforementioned in mind, The Shaw Group is worth an evaluation.

The Shaw Group (NYSE: SGR) is a leading supplier of industrial piping systems, including engineering, pipe erection and construction / maintenance services.

Analysts really like the fact that Shaw Group has also positioned itself as one of the largest engineering and construction contractors for the power generation market and as a top environmental services company. Another positive: SGR's large geographic footprint.

Analysts see 7-11% revenue growth for F2008, and 9-12% for F2009, with adequate margins. The Reuters F2008/F2009 EPS consensus estimates for SGR are $2.30/$3.32.

The risks? Analysts are monitoring potential cyclical declines in SGR's markets, overall cost containment, and the company's order backlog. Analysts are also keeping an eye on SGR's skilled labor costs.

The First Call mean rating for SGR is: Buy [12 firms]. Mean 2008 target: $62.00 [high: $80, low: $58].

Stock Analysis: The Shaw Group is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from SGR's shares. Sell / Stop Loss if you were to purchase shares in this company: $38.

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: emerging markets, engineering, infrastructure, SGR, Shaw Group