On February 25 Chicago Bridge and Iron (CBI) reported earnings of $1.91 a share. Excluding a big tax benefit (72 cents) and acquisition costs (11 cents) adjusted earnings came to $1.19 a share. That was 3 cents a share above Wall Street projections.
The company also confirmed its guidance for 2014 of $4.80 to $5.65 a share (versus the Wall Street consensus of $5.19.) Backlog grew 14% from the third quarter to $27.8 billion and total orders climbed 86% year over year. Margins for the company’s core engineering, construction, and maintenance unit climbed to 5.8% in the quarter from 4.3% in the third quarter. For 2014 the company said it expects margins in the upper part of the historical 4% to 7% range.
On the fourth quarter results and, more importantly, on the 2014 guidance, I’m raising my target price on Chicago Bridge & Iron to $90 a share by August 2014 from the prior target price of $76. Chicago Bridge & Iron is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/
I added Chicago Bridge & Iron to my Jubak’s Picks portfolio on May 20, 2013 at $63.41 as a way to profit from the global boom in liquefied natural gas and chemical plant construction. Read more
The nagging worries about the sustainability of the U.S. energy boom built around producing oil and natural gas from shale seem to have found a temporary (at least) home in the shares of Chesapeake Energy (CHK) after the company reported fourth quarter earnings after the close yesterday, February 26. (Chesapeake Energy is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )
Earnings of 27 cents a share were 12 cents a share below the Wall Street consensus. (Adjusted EBITDA—earnings before interest, taxes, depreciation, and amortization—climbed 4% year over year.) Revenue rose by 28.3% year over year to $4.54 billion versus the $4.4 billion analyst projection. Daily production averaged 665,000 barrels of oil equivalent. That’s an increase of 2% from the fourth quarter of 2012 and a drop of 1% from the third quarter of 2012. Average daily production for the quarter broke down this way: 111,300 barrels of oil, 63,700 barrels of natural gas liquids, and 2.9 billion cubic feet of natural gas.
Those results are a disappointment only if you ignore the company’s goals and the progress toward them these numbers represent. (The shares finished up 1.13% today.) Read more
If more companies were reporting sales and earnings growth like Middleby (MIDD) reported on February 25, the Standard & Poor’s 500 wouldn’t be having such trouble moving above its all time highs.
For the fourth quarter, Middleby reported earnings of $2.62 a share, 37 cents a share above the Wall Street consensus and a 29.1% increase from earnings in the fourth quarter of 2012. Revenue climbed 29.4% year over year to $377.4 million versus the $364.9 million consensus among analysts.
As of 2 p.m. New York time on February 25 Middleby shares were up $36.07 to $299.78 for a 13.7% gain. Middleby is a member of my long-term Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ )
Now I know that this pick is up 107% since I added it to this portfolio on May 3, 2013, but I don’t see any reason to sell here. The reason that Middleby is a long-term pick is that the company has a very simple growth strategy that it can repeat over and over again until the world stops opening and remodeling restaurants. And I don’t see that happening any time soon. Middleby noted in a 2012 investment conference presentation that it has products in one-third of all restaurants. That’s impressive—but it also means that Middleby doesn’t have products in two-thirds of the market.
Simple in Middleby’s case doesn’t mean easy to execute. Read more
It sure looks like the People’s Bank is tightening again.
China’s yuan was down 0.4% against the dollar at one point yesterday. That brought the currency’s decline to almost 1% since Wednesday, February 19. For most currencies a 1% drop in a week isn’t a huge deal. Just normal volatility, the markets would say. But this is the yuan, the very tightly managed yuan. China’s currency doesn’t move up or down unless the country’s central bank decides to let it move. So the move has set off loud alarm bells: Are we looking at a new policy move by the People’s Bank of China designed to 1) limit speculation in the currency, 2) pave the way for a wider trading band than the current daily maximum of 1%, and 3) reduce upward pressure on China’s money supply.
It’s the last that is making the markets the most nervous. Add a decision (if that’s what it is) to let the yuan fall together with figures from the People’s Bank showing it drained 100 billion yuan ($16.3 billion) from the financial system in the past week and you’re got solid evidence that the central bank has decided to tighten–again.
And that might be evidence that the People’s Congress, meeting next week, will announce a growth target for 2014 lower than the 7.5% target for 2013. Thinking here is that a lower growth target would give the central bank more room to tighten monetary policy.
All this is just starting to ripple out through Chinese financial markets—if only because any conclusion that we’re witnessing a shift toward tightening of the sort that knocked China’s equity markets into a bear in 2013 is so tentative. Read more
Seadrill (SDRL), the owner of the world’s second largest deepwater drilling fleet, knows only one speed—full throttle ahead. And right now that’s making investors and traders nervous. The Norwegian company has 8 drill ships, 3 semis, and 11 jackup rigs on order at a time when day rates for rigs are slipping and worries are rising about oversupply due to cuts in capital spending at oil companies.
Shares of Seadrill that traded as high as $47.78 on September 18 have tumbled to close at $37.68 on February 24. That’s a drop of 27% in five months. That drop in share price has taken Seadrill’s dividend yield up to 10.11%. That’s not all a result of a falling share price though—the company raised its dividend payout by 4% in the fourth quarter. (Seadrill is a member of both my Jubak’s Picks http://jubakpicks.com/the-jubak-picks/ and Dividend Income portfolios http://jubakpicks.com/jubak-dividend-income-portfolio/ .)
That’s a very attractive yield—unless, of course, the yield is signaling deep trouble at the company or in its sector.
We’re talking about a sector that, historically, has been subject to big swings as companies order lots of rigs during flush times when the day rates that oil companies will pay are high and then see all those orders create an oversupply of rigs that sends day rates tumbling. Most of the companies in the sector cope with those swings by building strong balance sheets that can withstand the rigors of an extended downturn.
Seadrill has never worked like that since John Fredriksen put the company together in 2005. Read more