Foster Wheeler AG (FWLT), KBR, Inc. (KBR), Chicago Bridge & Iron Company N.V. (CBI): Two Engineering & Construction Stocks To Buy, One To Hold

The only bearish indication given by the company was for the Australian market. Australia seems to be a very weak market for KBR, with little project activity (even on the small to medium side) outside of the mega projects that are well-known to investors. That’s not surprising, since the Street predicted this situation. What’s interesting to note is that KBR, Inc. (NYSE:KBR) seems relatively optimistic that the Browse LNG project could go forward as a Floating LNG development, and that it could potentially win some early engineering work on the project, perhaps as soon as early 2014.

A brief discussion on shale gas boom

As outlined in one of my previous posts, KBR has been one of my favorite bets in the E&C space. KBR is poised to benefit from the $57 billion-$65 billion investment that is expected to come in this space, given the shale gas boom.

What is interesting to note that the stock is only up 8% since the start of the year, which is much less than the 27% gain seen by one of its peers, Chicago Bridge & Iron Company N.V. (NYSE:CBI). Chicago Bridge & Iron Company N.V. (NYSE:CBI)’s end products and markets are almost identical to KBR’s.

Chicago Bridge & Iron Company N.V. (NYSE:CBI) remains one of the best positioned E&C companies to benefit from the investment in the energy infrastructure space. Apart from that, the company’s deal with SHAW group is still considered to be a bullish move. In addition, the company’s end markets are performing above expectations, and the management’s bookings guidance of $7 billion-10 billion seems to reflect the confidence that the management has in its momentum of winning awards.

However, a 27% rally in the stock price shows that much of the good news has already been priced into the stock. On the other hand, KBR is set to go up as the company wins more projects, both at home and abroad.

My foolish take

Both KBR, Inc. (NYSE:KBR) and Foster Wheeler AG (NASDAQ:FWLT) are recommended as “buys,” given their cheap valuations and attractive offshore prospects. A “neutral” rating on Chicago Bridge & Iron Company N.V. (NYSE:CBI) is predicated by its 27% rally since the start of the year. I will prefer to take a position after a pullback in the stock.

The article 2 Engineering & Construction Stocks To Buy, 1 To Hold originally appeared on Fool.com and is written by Zain Abbas.

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