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Time To Buy Chicago Bridge & Iron, Credit Suisse Says

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  • Chicago Bridge & Iron Company N.V. (NYSE: CBI) shares are down 11 percent since July 29, and are trading significantly below their 52-week high of $59.45.
  • Credit Suisse’s Jamie Cook upgraded the rating on the company from Neutral to Outperform, while raising the price target from $45 to $51.
  • The company is now significantly de-risked after the sale of outstanding equity in its nuclear business, Cook noted.

Chicago Bridge & Iron preannounced its 3Q15 revenue at $3.3 billion, missing the consensus estimate of $3.6 billion, and its adjusted EPS at $1.54, higher than the consensus expectation of $1.51. The company has entered into an agreement with Westinghouse Electric Company [WEC] for the sale of its nuclear business.

The agreement involves WEC acquiring all outstanding equity in Chicago Bridge & Iron’s nuclear business, in particular the Vogtle and Summer Projects and the China projects.

Analyst Jamie Cook pointed out that the Vogtle and Summer projects had been a significant overhang on Chicago Bridge & Iron since the Shaw deal due to concerns surrounding fixed price contracts with cost overruns and project delays.

Chicago Bridge & Iron will incur a non-cash charge of $1.0-$1.2 billion after tax, for the loss on the transaction, of which $904 million will be recorded in 3Q. The Credit Suisse report noted, “While the charge is large, we see this as a positive catalyst as the charge is now known, over, and non-cash.”

WEC has also agreed to assume all liabilities - including previous, current and future - associated with the nuclear projects. Cook mentioned that the agreement excludes Chicago Bridge & Iron’s fossil power gen business, its nuclear and industrial maintenance business, the MOX project and the Fed decommissioning business.

Latest Ratings for CBI

DateFirmActionFromTo
Dec 2016Argus ResearchInitiates Coverage OnBuy
Sep 2016Credit SuisseMaintainsOutperform
Sep 2016Johnson RiceDowngradesBuyHold

View More Analyst Ratings for CBI
View the Latest Analyst Ratings

Posted-In: Credit Suisse Jamie CookAnalyst Color Long Ideas Upgrades Price Target Analyst Ratings Trading Ideas

 

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