Chicago Bridge & Iron Company N.V (CBI) reported second quarter of fiscal 2012 results. Second quarter earnings were 74 cents, which was 2.8% above the Zacks Consensus Estimate of 72 cents and was up 19.4% compared to the prior year earnings of 62 cents a share. The company delivered a solid quarterly performance.

Total Revenue & Order

Revenue for the quarter grew 18.2% year over year to $1.3 billion, as the company benefited from the rising demand worldwide for energy infrastructure, especially in the LNG, gas processing and oil sands markets.

In the reported quarter, new awards totaled $1.8 billion, which increased the company’s backlog to above $10 billion with a good mix between reimbursable and lump sum contracts. In addition to the new contract awards Chicago Bridge & Iron Company had scope adjustments on existing projects in excess of $750 million.

Segment Revenue

The company reported revenue growth across all the three of its segments. CB&I Steel Plate Structures reported revenue growth of 9.5% to $500 million. The increase was primarily driven by higher activity in the large LNG tank and mechanical erection projects in the Asia Pacific region.

Project Engineering and Construction Segment reported a robust revenue growth of 31.3% year over year mainly due to the increased activities at the REFICAR refinery project and the construction of gas processing plants in the U.S.

Lummus Technology revenue for the quarter grew 2% driven by strong growth in the global petrochemical market. During the quarter, the company also licensed its first paraxylene license to Reliance Industries of India.

Reliance licensed a suite of three technologies from Lummus to build the world’s largest paraxylene plant. In relation to other technologies, the value of this licensed package and catalyst sale is higher, therefore generating strong growth.

Margin

Gross profit for the quarter grew 13.4% year over year while gross margin for the reported quarter declined 70 basis points (bps) to 12.2% year over year. The decline in gross margin reflects the changing relative revenue contribution of the company’s segments.

Like for example, revenue growth from the Project Engineering and Construction sector, accounted for 55% of the consolidated revenue during the second quarter of 2012 compared to 50% in the same period in 2011.

Operating margin in the quarter was 7.9% compared to 8.1% in the second quarter of 2011.

Balance Sheet & Cash Flow

Chicago Bridge & Iron’s balance sheet liquidity remains strong with a cash balance of $553 million and a net of debt of $513 million. During the quarter, the company returned $23 million to its shareholders through $5 million in dividends and stock repurchases worth $18 million. Capital expenditures in the second quarter totaled $23 million.

Outlook

Concurrent with the earnings release, the company has reaffirmed its new awards guidance for the year while has narrowed its revenue and earnings guidance for fiscal 2012.

Chicago Bridge & Iron reaffirms its new guidance in the range of $5.5 billion to $7.0 billion. Revenue is now expected to be in the range of $5.4 billion to $5.6 billion while earnings are expected in the range of $2.85 to $3.05 a share.

Although, the company has a huge order backlog this includes the value of new award commitments also until work is performed and revenue is recognized or until cancellation. Therefore, backlog may fluctuate with currency moments or cancellations. Hence, Chicago Bridge & Iron currently wants to take a cautious approach and has narrowed its revenue and earnings guidance.

However, the company is upbeat about its performance for the rest of fiscal 2012, on the back of current backlog and potential new awards. The company started its third quarter with a new award of contract worth $225 million for a peak sharing facility in Tomago in New South Wales, Australia.

Chicago Bridge & Iron currently has a Zacks Rank of #4 implying a strong Sell on short-term basis.

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