Time To Buy Chicago Bridge & Iron, Credit Suisse Says

• Chicago Bridge & Iron Company N.V. 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.