Time To Buy Chicago Bridge & Iron, Credit Suisse Says
- 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
|Dec 2016||Argus Research||Initiates Coverage On||Buy|
|Sep 2016||Credit Suisse||Maintains||Outperform|
|Sep 2016||Johnson Rice||Downgrades||Buy||Hold|
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