Chicago Bridge & Iron Company (CBI, Financial) is an energy infrastructure-focused company that provides a whole list of services including design, engineering, procurement, fabrication, construction and commissioning services.
Buffett has close to 10% of the company with 10.7 million shares. Plenty of other big name money managers own CBI stock. Einhorn just upped his position by 129% to 4.44% or 6.7 million shares. Tepper owns 1.1 million and Greenblatt owns close to a million shares, each of these men are in the top 1% of guru investors.
From a financial standpoint, it’s easy to see why they like the stock. CBI has grown considerably over the last decade, producing consistent advances in earnings and book value, and while the company's gross margins and return on equity are not necessarily indicative of a typical value investment (at least not a Buffett trade), the potential moat around the company could keep these numbers moving higher for years to come.
CBI in 2005
- Sales: $2.25 billion
- Profit: $16 million
- Book: $4.95
CBI in 2015
- Sales: $13.2 billion
- Profit: $587 million
- Book: $26.12
Chicago Bridge & Iron is looking to repurchase about 10% of its total outstanding shares through 2016. That’s roughly 11 million shares, which will boost the share price and ownership percentage in any investment made today.
However, what really matters is the state of the stock price versus the value of the company based on today’s market. If CBI buys back 10% of the stock while doubling its net income to $1.1 billion, the EPS will be around $11 per share. At the current multiple (which is far lower than the average), that would put the stock at $110 to $115 per share.
CBI in 2015
- Sales: $13.2 billion
- Profit: $587 million
- Book: $26.12
- EPS: $5.38
CBI in 2020 (Estimates)
- Sales: $27 billion
- Profit: $1.1 billion
- Book: $52 - $55
- EPS: $11 - $12
This is based on the company doubling its current financial results with a little engineering on shares outstanding to boost the per share value of the company for those investors that buy in now.
Based on the company's ability to grow from here, which will be nowhere near its previous growth rate, along with the chance of a multiple expansion coupled with share buybacks, I think investors could easily see a $100 to $110 number in the next 5 years, or sooner, even if the economy slows. This performance should outpace the returns on the S&P 500, which CBI has done, albeit in a choppy fashion, throughout the last decade.
