Building Momentum, Chicago Bridge & Iron Analysts Uphold Bullish Sentiment After Positive Ruling

Chicago Bridge & Iron Company N.V. (NYSE: CBI) shares have soared since Tuesday following a favorable Westinghouse decision.

The ruling, issued Tuesday, reversed a lower court’s decision “which held that the accounting dispute under the agreed upon nuclear purchase price working capital peg could be considered before an Independent Auditor,” according to Baird senior research analyst Andrew Wittmann. Several Wall Street sell-side analysts immediately reacted to the positive ruling:

• Wittmann maintains his Neutral rating with a $25 price target.
• Citi analyst Andrew Kaplowitz maintains a Neutral rating.
• MKM Partners executive director Daniel Scott reiterated his Buy rating with a $34 price target.

Court Decision Couldn't Have Gone Much Better For CB&I

All three analysts echoed a similar sentiment, and each of them described the ruling as extremely favorable for Chicago Bridge & Iron and its investors.

“Investors had been contemplating various settlement scenarios that involved payments of several hundred million dollars by CBI, and it is our opinion that this is pretty much the best outcome CBI could have hoped for,” Scott said.

Wittman highlighted how the new ruling significantly weakens Westinghouse’s argument, and “the Supreme Court instead holds that Westinghouse is only able to address ‘changes in factors or circumstances.’” He went on to say, “Importantly, with the Westinghouse resolution, valuation can arguably be better defined, a positive.”

The move should take pressure off of CB&I shares according to Kaplowitz. “While it appears the dispute is still ongoing, it appears that the potential liability for CBI could be limited to a small fraction of the prior $2 billion WEC was seeking.”

Overall, it is evident that analysts have a positive sentiment following the ruling. CB&I was trading up over 7 percent, at $21.53, during Wednesday’s trading session.

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