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$15 Could Be An Important Level For Chicago Bridge & Iron Investors

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$15 Could Be An Important Level For Chicago Bridge & Iron Investors
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Engineering, procurement and construction services company Chicago Bridge & Iron Company N.V. (NYSE: CBI) has been on a steep descent since late April. A longer-term chart shows the broader trend has been downward since April 2014 following the post-Great Recession recovery, which took the stock to an all-time closing high of $87.65 on April 2, 2014.

Where will the recent sell-off stall?

The pedigree of the stock can never be doubted despite its recent abysmal showing, as it was once on the radar of billionaire investor Warren Buffett. It was only in February 2016 he exited the stock completely. At that time, the stock was trading short of the $40 mark.

Trump Bump

Trump's promise of invigorating infrastructure boosted several stocks that have exposure to the sector during his campaign period as well as a little after his swearing in. The Trump Bump helped Chicago Bridge & Iron as well, as a result, it had a short uptrend that interspersed the broader downtrend.

From a low of $26.46 on September 21, 2016, the stock rallied through the election and after that, peaking at $36 on February 15, 2017. Incidentally, the rally in some of the infrastructure plays bumped up by the Trump plan, continued even after that.

Fundamentals Drag

Subsequently, Chicago Bridge & Iron resumed its downtrend, with the fourth quarter earnings miss not helping matters further.

The selling intensified following the release of its first quarter results on May 8. In reaction to the results, the stock fell over 7 percent on May 9.

The company's first-quarter earnings per share and revenues missed estimates, while it slashed its 2017 earnings per share guidance from $4–$4.60 to $3.50–$4.

The stock has nearly halved since then.

Chicago Bridge & Iron shares fell further to $24.32 on May 11 from $25.39 on May 10, when the 10-Q was released.

After closing June 2 at $19.20, the stock had a torrid time in the week ended June 9, as it slumped to $15.37 on June 7, marking the lowest level since September 2009. Macquarie lowered its price target on the shares to $11.50, according to Seeking Alpha. The firm blamed the action on the potential legal liability related to its nuclear divestiture, cash burn at the company and its uncollectable receivables.

After coming off this level in subsequent sessions, the stock took a heavy beating on Thursday, dropping about 6 percent.

Watch Out for These Levels

The $15 level could serve as a key psychological resistance for the stock. The lack of any meaningful negative catalysts amid the precipitous drop seen in the near term makes one wonder whether the market is bracing for more negative news.

CBI Chart
Source: YCharts

Meanwhile, giving his rationale for the predicament, Jim Cramer suggested that lower energy prices have hurt the company, which services the oil & gas and utility industries. Additionally, Cramer sees issues with the two acquisitions the company made in 2012 and 2013.

Investors may do well to watch this $15 handle and if the stock fails to hold support, a move to around $11.50 cannot ruled out, as this has served as a long-term support.

At the time of writing, shares of Chicago Iron & Bridge were down 6.32 percent at $15.19.

Related Links:

The True Cost Of Fixing America's Infrastructure

How Trump's Plan For Taxes And Infrastructure Is Really A Resurrected Obama-Era Concept

Latest Ratings for CBI

DateFirmActionFromTo
Nov 2017Credit SuisseMaintainsNeutral
Nov 2017UBSMaintainsNeutral
Oct 2017BairdMaintainsNeutral

View More Analyst Ratings for CBI
View the Latest Analyst Ratings

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