Chicago Bridge and Iron (CBI, Financial) stock jumped 8% in Friday’s trading after Bloomberg reported that Anadarko Petroleum Corp (APC) is poised to select a construction team led by Chicago Bridge & Iron Co. as its main contractor for a potential $15 billion Mozambique liquefied natural gas project. Chicago Bridge & Iron’s current backlog is ~$30 bn and this win may help it significantly increase its backlog and revenue visibility in the near term. Further, Anadarko proceeding with this project will also reassure investors who are worried about the fate of energy mega-projects amid the oil market downturn.
Chicago Bridge and Iron is trading at 9.68 time current year earnings and analysts are expecting its top and bottomline to decline slightly over the next year. A win of the size of Mozambique LNG project may help the company grow its revenue next year, instead of slight decline which analysts are modeling. So, there is a good chance of the next year numbers getting revised upwards when the deal is formally announced.
In separate news yesterday, latest 13F filing by legendary investor David Einhorn (Trades, Portfolio) showed that he has more than doubled his position in Chicago Bridge and Iron last quarter. He initiated a position in the stock in December quarter when the stock corrected significantly post decline in crude oil prices. As of March 31, he was holding ~6.7 mn shares of the company.
Chicago Bridge and Iron’s stock looks undervalued according to Guru Focus’ DCF calculator and has a margin of safety of 31%. The company has business predictability rating of 5 star. Recently another fund manager Arnold Van Den Berg (Trades, Portfolio) also increased his stake in the company. I believe the stock is a good buy at the current level given the company’s history of growth, attractive valuations and potential to win big energy projects.
