Chicago Bridge & Iron Company N.V. (CBI): This Stock Is Set To Skyrocket

Additionally, management expects its margins to further improve in 2013, as 85% of its order backlog includes high margin projects But that seems to be an industry-wide advantage, as both Fluor Corporation (NEW) (NYSE:FLR) and KBR, Inc. (NYSE:KBR) have been recording margin expansions lately.

The management of Fluor Corporation (NEW) (NYSE:FLR) explained that this is because the demand for energy projects is gradually picking up, which is apparently resulting in higher margins. Its margins may have improved of the short-term term, but the bottom-line remains that its gross margins have deteriorated by 31% over the last 5 years.

As of now, Fluor Corp. operates with a gross margin of 3.3%, which is expected to balloon up to 4% sometime this year. Owing to improving margins and rebounding energy industry, analysts at Deutsche bank estimate that the fair price of Fluor Corp. is $84 per share.

Meanwhile KBR, Inc. (NYSE:KBR) has recorded a 150bps margin improvement over the last year, primarily due to its cost control measures. Apart from that, its order book witnessed only a slight deterioration because KBR had a strong 2012. However, its management expects an even better 2013, which suggests that KBR’s order backlog could quickly balloon up in the coming quarters.

With improving margins and bullish guidance on order inflows, its not hard to justify why analysts Deutsche Bank have a price target of $44 per share (a 38% premium).

Final Words

I think that both KBR and Chicago Bridge & Iron Company N.V. (NYSE:CBI) offer lucrative returns, as their gross margins have improved by 70% and 51%, respectively, over the last 5 years. But the acquisition of Shaw Group, along with Freeport LNG development project, should propel Chicago Bridge’s short to medium term returns. This is why analysts at Deutsche Bank are particularly bullish on Chicago Bridge with a price target of $87 per share (a 47% premium).

The article This Stock Is Set To Skyrocket originally appeared on Fool.com and is written by Piyush Arora.

Piyush Arora has no position in any stocks mentioned. The Motley Fool owns shares of Fluor. Piyush is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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