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Chicago Bridge & Iron (CBI) Q4 Earnings Miss on Weak Sales
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Chicago Bridge & Iron Company N.V. posted a massive earnings miss in its fourth-quarter 2016 results, as adjusted earnings of 85 cents per share missed the Zacks Consensus Estimate of $1.48 by 42.6%.
The bottom line didn’t fare much better in year-over-year comparison either, having plummeted 32.5% from the adjusted earnings figure of $1.26 per share reported in the year-ago quarter. Profits were badly hurt as the company booked a pre-tax non-cash goodwill impairment charge of roughly $655 million in the quarter to account for the sale of its Capital Services business.
For full-year 2016, adjusted earnings fell 8.8% from the prior-year’s tally to $4.23 per share.
Inside the Headlines
The company reported fourth-quarter 2016 revenues of $2,540 million, missing the Zacks Consensus Estimate of $2,731 million. Further, revenues plunged a whopping 22.4% year over year. The lackluster top-line performance during the quarter was largely a result of revenue declines across nearly all of the company’s segments.
For the full year, revenues declined 17.4% year over year to $10.7 billion.The decline was primarily attributable to delays in several project awards, which the company had anticipated, would generate about 25% of the company’s revenues for the year.
Fourth-quarter gross profit slumped 69.2% year over year to $117.4 million, while gross margin contracted by a massive 700 basis points to 4.6%. Margins were deeply affected by charges for material increases in cost-to-complete estimates in the company’s Engineering & Construction and Fabrication Services segments.
Adjusted operating income for the quarter came in at $34.6 million, down 85% year over year.
The company booked new awards worth $1,391 million during the quarter, compared with $3,254 billion in the prior-year quarter. The decline in new award wins was largely attributable to delays in several cautionary spending on part of the large clients who continue to defer investments due to softness in energy markets.
Segmental Revenues
Revenues from the Engineering and Construction segment came in at $1,386 million, down 8.3% on a year-over-year basis, mainly due to the absence of revenues from the divested nuclear operations business line. New awards in this segment were $325.6 million in the quarter, reflecting a humongous decline of 81.7% from the comparable quarter last year.
Fabrication Services quarterly revenues totaled $553 million, almost flat year over year. New awards received by this segment dropped (down 14.6%) to $421.6 million at the end of the fourth quarter compared with $493.8 million in the prior-year quarter.
Technology revenues were down 26.7% year over year to $64.9 million. Also, this segment won over $168.7 million of new contracts in the quarter, reflecting a decline of nearly 47.6% year over year.
Capital Services revenues fell 13.1% year over year to $535.9 million. Further, new contracts received by this segment plunged 28% to $475.6 million in the quarter.
Liquidity
Chicago Bridge & Iron’s cash and cash equivalents as of Dec 31, 2016 came in at $505.2 million compared with $550.2 million a year ago. Net cash generated from operating activities in the year ended Dec 31, 2016 came in at $654.5 million, a remarkable turnaround from the net cash used in operating activities of $56.2 million in the comparable period last year. Net long-term debt was $1,288 million at year end compared with $1,792 million as of Dec 31, 2015.
Chicago Bridge & Iron Company N.V. Price, Consensus and EPS Surprise
Concurrent with the earnings release, Chicago Bridge & Iron entered into a definitive agreement to sell its Capital Services business to an affiliate of the private equity investment firm Veritas Capital for $755 million in cash. The deal is expected to conclude in second-quarter 2017.
To account for the sale, the company booked a pre-tax non-cash goodwill impairment charge of roughly $655 million in fourth-quarter 2016.
The sale is part of the company’s efforts to realign its business with its long-term strategy, and realize cost synergies. The divestiture will generate significant cash proceeds, which Chicago Bridge & Iron will use to reduce its outstanding debt.
Share Repurchase
Chicago Bridge & Iron returned $235 million to its shareholders through stock repurchases and dividends in the year 2016.
Guidance
Chicago Bridge & Iron provided its guidance for full-year 2017. The company estimates revenues in the range of $9.5–$10.5 billion, of which about 80% was already in its 2016 year-end backlog. In addition, diluted earnings per share are projected in the band of $4.00–$4.60 per share.
To Conclude
Chicago Bridge & Iron’s fourth-quarter earnings took a beating from macroeconomic uncertainties and prolonged softness in the energy markets. These conditions might sustain in the foreseeable future, which will hit client spending, and consequently Chicago Bridge & Iron’s operations. In fact, the company is seeing increasing global demand for petrochemical and refining opportunities, but final investment decisions are still delayed as clients adjust to global commodity pricing.
Despite these headwinds, Chicago Bridge & Iron is confident about the strong trends in the Technology operating group, which is a leading indicator of recovery in the energy markets. Also, diligent cost-cutting strategies as well as the company’s competitive business model are expected to offset some of the weaknesses.
The company is hopeful about its prospects in the U.S., East Africa and the Middle East, specifically in Oman, the Emirates, Bahrain and Saudi Arabia. We are bullish on the company as stable commodity prices and ongoing development of major capital programs (specifically in North America and the Middle East), will likely generate extensive backlog growth for the company in 2017.
Chicago Bridge & Iron currently carries a Zacks Rank #2 (Buy).
Stocks to Consider
Other stocks worth considering in the broader sector include II-VI Incorporated , DR Horton Inc. (DHI - Free Report) and MasTec, Inc. (MTZ - Free Report) .
II-VI Incorporated, sporting a Zacks Rank #1 (Strong Buy), has registered a remarkable positive average surprise of over 59.2% for the last four quarters, driven by four remarkable consecutive beats. You can see the complete list of today’s Zacks #1 Rank stocks here.
DR Horton carries a Zacks Rank #2 and has a decent earnings beat history, having surpassed estimates twice over the trailing four quarters for an average beat of 6.3%
Infrastructure engineering and construction company – MasTec – has managed to beat earnings each time over the trailing four quarters. It has a positive average surprise of 54.4% and holds a Zacks Rank #2.
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Chicago Bridge & Iron (CBI) Q4 Earnings Miss on Weak Sales
Chicago Bridge & Iron Company N.V. posted a massive earnings miss in its fourth-quarter 2016 results, as adjusted earnings of 85 cents per share missed the Zacks Consensus Estimate of $1.48 by 42.6%.
The bottom line didn’t fare much better in year-over-year comparison either, having plummeted 32.5% from the adjusted earnings figure of $1.26 per share reported in the year-ago quarter. Profits were badly hurt as the company booked a pre-tax non-cash goodwill impairment charge of roughly $655 million in the quarter to account for the sale of its Capital Services business.
For full-year 2016, adjusted earnings fell 8.8% from the prior-year’s tally to $4.23 per share.
Inside the Headlines
The company reported fourth-quarter 2016 revenues of $2,540 million, missing the Zacks Consensus Estimate of $2,731 million. Further, revenues plunged a whopping 22.4% year over year. The lackluster top-line performance during the quarter was largely a result of revenue declines across nearly all of the company’s segments.
For the full year, revenues declined 17.4% year over year to $10.7 billion.The decline was primarily attributable to delays in several project awards, which the company had anticipated, would generate about 25% of the company’s revenues for the year.
Fourth-quarter gross profit slumped 69.2% year over year to $117.4 million, while gross margin contracted by a massive 700 basis points to 4.6%. Margins were deeply affected by charges for material increases in cost-to-complete estimates in the company’s Engineering & Construction and Fabrication Services segments.
Adjusted operating income for the quarter came in at $34.6 million, down 85% year over year.
The company booked new awards worth $1,391 million during the quarter, compared with $3,254 billion in the prior-year quarter. The decline in new award wins was largely attributable to delays in several cautionary spending on part of the large clients who continue to defer investments due to softness in energy markets.
Segmental Revenues
Revenues from the Engineering and Construction segment came in at $1,386 million, down 8.3% on a year-over-year basis, mainly due to the absence of revenues from the divested nuclear operations business line. New awards in this segment were $325.6 million in the quarter, reflecting a humongous decline of 81.7% from the comparable quarter last year.
Fabrication Services quarterly revenues totaled $553 million, almost flat year over year. New awards received by this segment dropped (down 14.6%) to $421.6 million at the end of the fourth quarter compared with $493.8 million in the prior-year quarter.
Technology revenues were down 26.7% year over year to $64.9 million. Also, this segment won over $168.7 million of new contracts in the quarter, reflecting a decline of nearly 47.6% year over year.
Capital Services revenues fell 13.1% year over year to $535.9 million. Further, new contracts received by this segment plunged 28% to $475.6 million in the quarter.
Liquidity
Chicago Bridge & Iron’s cash and cash equivalents as of Dec 31, 2016 came in at $505.2 million compared with $550.2 million a year ago. Net cash generated from operating activities in the year ended Dec 31, 2016 came in at $654.5 million, a remarkable turnaround from the net cash used in operating activities of $56.2 million in the comparable period last year. Net long-term debt was $1,288 million at year end compared with $1,792 million as of Dec 31, 2015.
Chicago Bridge & Iron Company N.V. Price, Consensus and EPS Surprise
Chicago Bridge & Iron Company N.V. Price, Consensus and EPS Surprise | Chicago Bridge & Iron Company N.V. Quote
Divestiture of Capital Services Business
Concurrent with the earnings release, Chicago Bridge & Iron entered into a definitive agreement to sell its Capital Services business to an affiliate of the private equity investment firm Veritas Capital for $755 million in cash. The deal is expected to conclude in second-quarter 2017.
To account for the sale, the company booked a pre-tax non-cash goodwill impairment charge of roughly $655 million in fourth-quarter 2016.
The sale is part of the company’s efforts to realign its business with its long-term strategy, and realize cost synergies. The divestiture will generate significant cash proceeds, which Chicago Bridge & Iron will use to reduce its outstanding debt.
Share Repurchase
Chicago Bridge & Iron returned $235 million to its shareholders through stock repurchases and dividends in the year 2016.
Guidance
Chicago Bridge & Iron provided its guidance for full-year 2017. The company estimates revenues in the range of $9.5–$10.5 billion, of which about 80% was already in its 2016 year-end backlog. In addition, diluted earnings per share are projected in the band of $4.00–$4.60 per share.
To Conclude
Chicago Bridge & Iron’s fourth-quarter earnings took a beating from macroeconomic uncertainties and prolonged softness in the energy markets. These conditions might sustain in the foreseeable future, which will hit client spending, and consequently Chicago Bridge & Iron’s operations. In fact, the company is seeing increasing global demand for petrochemical and refining opportunities, but final investment decisions are still delayed as clients adjust to global commodity pricing.
Despite these headwinds, Chicago Bridge & Iron is confident about the strong trends in the Technology operating group, which is a leading indicator of recovery in the energy markets. Also, diligent cost-cutting strategies as well as the company’s competitive business model are expected to offset some of the weaknesses.
The company is hopeful about its prospects in the U.S., East Africa and the Middle East, specifically in Oman, the Emirates, Bahrain and Saudi Arabia. We are bullish on the company as stable commodity prices and ongoing development of major capital programs (specifically in North America and the Middle East), will likely generate extensive backlog growth for the company in 2017.
Chicago Bridge & Iron currently carries a Zacks Rank #2 (Buy).
Stocks to Consider
Other stocks worth considering in the broader sector include II-VI Incorporated , DR Horton Inc. (DHI - Free Report) and MasTec, Inc. (MTZ - Free Report) .
II-VI Incorporated, sporting a Zacks Rank #1 (Strong Buy), has registered a remarkable positive average surprise of over 59.2% for the last four quarters, driven by four remarkable consecutive beats. You can see the complete list of today’s Zacks #1 Rank stocks here.
DR Horton carries a Zacks Rank #2 and has a decent earnings beat history, having surpassed estimates twice over the trailing four quarters for an average beat of 6.3%
Infrastructure engineering and construction company – MasTec – has managed to beat earnings each time over the trailing four quarters. It has a positive average surprise of 54.4% and holds a Zacks Rank #2.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO. Watch List today for free >>