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Why Chicago Bridge & Iron Stock Fell 15% Yesterday

By Rich Smith – Nov 1, 2017 at 7:01AM

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Decent guidance can't make up for a pretty bad earnings miss.

What happened

Shares of construction and engineering company Chicago Bridge & Iron (CBI) fell as much as 15% in Tuesday trading, before retracing to book a 13.8% loss by day's end.

Chicago Bridge had reported its fiscal third quarter 2017 earnings the evening before, and missed analyst estimates pretty badly. Instead of the $0.53 per share in pro forma profit that Wall Street was expecting, Chicago Bridge announced adjusted earnings of just $0.34 per share. The company's quarterly revenue likewise fell short of Wall Street's anticipated $1.81 billion.

Bridge being blown up

"Chicago Bridge (stock) is falling down, falling down, falling down..." Image source: Getty Images.

So what

And that's the good news. The bad news is that, when calculated according to the usual GAAP accounting standards, Chicago Bridge & Iron earned less than a third of its supposed "adjusted profits." Net income for the quarter amounted to just $0.10 per share -- a 92% drop from last year's $1.20 profit. Revenues, which came in at $1.74 billion for the quarter, suffered a steep 19% year over year decline.

Management blamed "continued cost pressure during the quarter, primarily on the IPL and Calpine power projects," as well as a series of "unusual items" costing it $0.31 per share in one-time charges, for the earnings disappointment.

Now what

The implication of all that, of course, is that next quarter hopefully won't be so disappointing for Chicago Bridge & Iron shareholders. So how is next quarter looking?

Actually, not too shabby. According to Yahoo! Finance data, analysts are looking for Chicago Bridge to earn about $0.53 per share on $1.83 billion in revenues in Q4. Management, however, is now guiding investors to expect a bit more than that. CB&I's latest guidance suggests earnings should range between $0.50 and $0.60 per share -- or $0.55 at the midpoint, and two cents above consensus estimates. Chicago Bridge is also looking for revenues to come in between $1.8 billion and $2 billion in the current quarter, comfortably ahead of expectations at a range midpoint of $1.9 billion.

Granted, even if everything works out as management says it will, CB&I investors are still almost certainly looking at a full-year loss for 2017, a negative P/E ratio for CB&I stock -- and no dividend. No wonder they're upset.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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