Engineering company Chicago Bridge & Iron Company N.V. (CBI) reported third-quarter 2013 adjusted earnings of $121.3 million or $1.12 per share (excluding the one time items), in line with the Zacks Consensus Estimate. Adjusted net income improved 46.7% year over year on the back of strong project activities during the quarter.
On a GAAP basis, the company reported earnings of $117.7 million or $1.08 a share. Earnings per share increased 31.7% year over year. GAAP earnings included an acquisition-related cost of $3.7 million or 4 cents per share.
Total Revenue & Contracts
Revenues for the quarter increased a robust 106.8% year over year to $3.0 billion, driven by healthy revenue growth across all the three legacy business units of the company due to the rising demand for energy infrastructure, especially in the LNG, gas processing and oil and gas markets across the world.
The company’s acquired business units drove the majority of the revenue growth.
In the reported quarter, new contracts totaled $2.5 billion (up 168.6% year over year), led by new deals penned by the Project Engineering and Construction Segment. However, the company’s backlog was flat sequentially at $24.5 billion.
Segment Revenues
The company reported revenue growth across all four segments.
The Project Engineering and Construction segment’s revenues surged 101% year over year to $1.7 billion. About 70% of the increase was due to greater number of acquisitions.
Additionally, the company’s oil and gas business unit reported healthy growth with significant revenue increase related to increased activities in LNG and gas processing work in the Asia-Pacific. Continued significant activities at its REFICAR refinery project and power and nuclear projects boosted revenues.
Fabrication Services reported third-quarter 2013 revenues of $707 million, reflecting a healthy 66.2% year-on-year increase. The rise was driven by robust domestic and international markets which were strengthened by shale gas, petrochemical and LNG development.
Lummus Technology recorded revenues of $156 million, compared with $150 million in the third quarter of 2012. The increase was driven by greater volume of heat transfer and licensing revenues from a higher beginning-of-the-year backlog.
Government Solutions segment reported revenues of $378 million or 13% of total revenue and an operating income of $15.7 million. This segment benefited from a large number of projects ranging from small environmental compliance projects to large EPC (Engineering, procurement and construction) projects for the federal government.
Margin
Gross profit for the quarter grew 67.6% year over to $316.6 million. Operating profit was $202.1 million, up 57.7% year over year. The increase in operating profit was primarily driven by accretive acquisitions and higher revenues from oil and gas and technology business units. However, operating profit margin fell 210 basis points due to change in volume mix of the legacy business units and acquisition costs.
Balance Sheet & Cash Flow
At quarter-end, the company had shareholders' equity of more than $2 billion, along with long-term debt of $1.7 billion. Cash flow from operating activities was negative $194 million compared to a positive $138.1 million in the prior-year quarter.
Exiting the quarter, the company had cash and cash equivalents of $543 million compared to $655 million in the third quarter of 2012.
Outlook
Along with quarterly earnings, the company reiterated its guidance for full year 2013 and expects revenues to be in the range of $10.7–$11.2 billion, with adjusted EPS in the range of $4.00–$4.35. The company expects new contracts in the range of $11.0–$15.0 billion.
Chicago Bridge currently has a Zacks Rank #3 (Hold). Other companies in the industry which look promising at the moment include Great Lakes Dredge & Dock Corporation (GLDD), Jacobs Engineering Group, Inc. (JEC) and Rexnord Corporation (RXN). All three carry a Zacks Rank #2 (Buy).
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