Argus Crossing Over To A Hold Rating On Chicago Bridge & Iron

John Eade of Argus downgraded Chicago Bridge & Iron Company N.V. CBI to Hold from Buy after a bad fourth quarter EPS miss and energy sector weakness.

“CBI has faced challenges from energy sector weakness over the last two years and is unlikely to see a sudden rebound in revenue or earnings. In recent quarters, the company has been divesting assets, taking nine-figure losses along the way and weakening the balance sheet,” Eade wrote in a note.

Over the past quarter, CBI shares fell 13 percent versus an increase of 5.5 percent for the S&P 500. They've also underperformed over the past year, with a decline of 17 percent compared to an advance of 18 percent for the broader market.

The stock weakness reflects its current business challenges, as well as uncertainties related to a legal dispute with Westinghouse Electric, which bought Chicago Bridge’s nuclear construction business in late 2015.

Estimate Cut

The analyst also cut his 2017 EPS forecast to $4.20 from $4.50, based on expected revenue weakness in Engineering & Construction and Fabrication Services.

Eade noted that the market recovery would be gradual, and believes it will take time for most of the company’s energy industry customers to begin new capital projects.

“We will look for a pick-up in orders and the backlog as a potential signal that CBI’s business has turned the corner and may once again be poised for growth,” Eade added.

At last check, shares of Chicago Bridge fell 1.97 percent to $29.80.

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