Chicago Bridge & Iron: 8 Different Insiders Have Sold Shares During The Last 30 Days

Apr.15.14 | About: Chicago Bridge (CBI)

Summary

Eight insiders sold Chicago Bridge & Iron stock within one month.

The stock was not purchased by any insiders in the month of intensive selling.

Seven of these eight insiders decreased their holdings by more than 10%.

Chicago Bridge & Iron Company N.V. (NYSE:CBI) provides conceptual design, technology, engineering, procurement, fabrication, modularization, construction, commissioning, maintenance, program management, and environmental services to customers in the energy infrastructure worldwide.

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Insider selling during the last 30 days

Here is a table of Chicago Bridge & Iron's insider activity during the last 30 days.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Beth Bailey EVP April 10 5,000 Yes 78,608 shares 6.0%
Patrick Mullen EVP Mar 18-Apr 4 7,637 Yes 34,782 shares 18.0%
Edgar Ray EVP March 26 102,068 Yes 35,774 shares 74.0%
Marsha Williams Director March 27 6,500 Yes 49,434 shares 11.6%
Richard Chandler CLO March 26 20,801 Yes 22,192 shares 48.4%
Richard Flury Director March 26 12,410 Yes 47,612 shares 20.7%
Daniel McCarthy EVP March 25 26,029 Yes 56,968 shares 31.4%
Westley Stockton CAO March 18 2,054 Yes 8,004 shares 20.4%
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There have been 182,499 shares sold by insiders during the last 30 days. All these shares were sold pursuant to a Rule 10b5-1 plan.

SEC Rule 10b5-1 is a regulation enacted by the United States Securities and Exchange Commission (SEC) in 2000. The SEC states that Rule 10b5-1 was enacted in order to resolve an unsettled issue over the definition of insider trading, which is prohibited by SEC Rule 10b-5. After Rule 10b5-1 was enacted, the SEC staff publicly took the position that canceling a planned trade made under the safe harbor does not constitute insider trading, even if the person was aware of the inside information when canceling the trade. This staff interpretation raises the possibility that executives can exploit this safe harbor by entering into 10b5-1 trading plans before they have inside information while retaining the option to later cancel those plans based on inside information.

For example, a CEO of a company could call a broker on January 1 and enter into a plan to sell a particular quantity of shares of his company's stock on March 1, find out terrible news about his company on February 1 that will not become public until April 1, and then go forward with the March 1 sale anyway, saving himself from losing money when the bad news becomes public. Under the terms of Rule 10b5-1(b) this is insider trading because the CEO "was aware" of the inside information when he made the trade. But he can assert an affirmative defense under Rule 10b5-1(c), because he planned the trade before he learned the inside information.

In general, it is a safer way for an insider to sell shares pursuant to a Rule 10b5-1 trading plan than without it.

Insider selling by calendar month

Here is a table of Chicago Bridge & Iron's insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
April 2014 7,637 0
March 2014 286,934 0
February 2014 21,411 0
January 2014 1,999 0
December 2013 97,587 0
November 2013 40,840 0
October 2013 57,142 0
September 2013 131,637 0
August 2013 0 0
July 2013 18,050 0
June 2013 119,312 0
May 2013 94,215 0
April 2013 22,843 0
March 2013 161,730 0
February 2013 0 0
January 2013 2,000 0
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There have been 1,063,337 shares sold, and there have been zero shares purchased by insiders since January 2013. The month of March 2014 has seen the most insider selling.

Financials

Chicago Bridge & Iron reported the full-year 2013 financial results on February 25 with the following highlights:

Revenue $11.1 billion
Net income $454.1 million
Cash $420.5 million
Debt $1.8 billion
Backlog $27.8 billion
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The eight insiders sold their shares after these results.

Outlook

Chicago Bridge & Iron's 2014 guidance is as follows:

Revenue $12.6-$13.2 billion
EPS $4.80-$5.65
CapEx ~$175 million
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Competition

Chicago Bridge & Iron's competitors include Quanta Services (NYSE:PWR). Here is a table comparing these two companies.

Company CBI PWR
Market Cap: 8.79B 7.68B
Employees: 55,900 20,900
Qtrly Rev Growth (yoy): 1.20 0.09
Revenue: 11.09B 6.52B
Gross Margin: 0.11 0.16
EBITDA: 934.27M 688.55M
Operating Margin: 0.07 0.08
Net Income: 454.12M 401.92M
EPS: 4.23 1.87
P/E: 19.37 18.87
PEG (5 yr expected): 0.85 1.88
P/S: 0.81 1.20
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Chicago Bridge & Iron has a higher P/E ratio than Quanta Services. In Quanta Services, there have been 10,000 shares sold and there have been zero shares purchased by insiders this year. Only Chicago Bridge & Iron has seen intensive insider selling during the last 30 days.

Conclusion

There have been eight different insiders selling Chicago Bridge & Iron, and there have not been any insiders buying Chicago Bridge & Iron during the last 30 days. Seven of these eight insiders decreased their holdings by more than 10%. Chicago Bridge & Iron has an insider ownership of 1.71%.

Chicago Bridge & Iron has a $74 price target from the Point & Figure chart. I believe there is an opportunity for a short entry with the $74 price target. I would place a stop loss at $89, which is the all-time high. The two main reasons for the proposed short entry are a bearish Point & Figure chart, and the intensive insider-selling activity.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in CBI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.