Shaw a Buy with Revenue Increases, Booked Contracts

Well after sitting and reading over the Shaw Group (SGR) earnings report, you just have to be mighty impressed. As I mentioned I want access to those massive petro dollars building day after day in the Middle East and Shaw Group's got it.

• Via Reuters: The company reported earnings for the fiscal quarter ended May 31 of $54.6 million, or 67 cents a share, compared to a loss of $16.7 million, or 21 cents a share, a year ago.
• Revenues for the quarter rose to $1.6 billion from $1.23 billion a year ago.
• Revenues from its Middle East activities more than doubled the quarter to $214 million, or about 14 percent of its total, while U.S. revenues jumped more than $200 million to $1.27 billion.
• Shaw's backlog of orders as of May 31 was a record $13.3 billion, up from about $8 billion a year earlier.
• Via AP: Engineering and construction services provider Shaw Group Inc. said Wednesday it swung to a profit in its third quarter on strong demand for power generation capacity and petrochemicals processing.
• Analysts polled by Thomson Financial expected earnings per share of 40 cents.
• Revenue rose 31 percent to $1.6 billion from $1.23 billion in the third quarter of 2006. Analysts predicted revenue of $1.55 billion.
• Revenue in almost all the company's divisions grew in the quarter. Sales in its biggest business, its fossil and nuclear division, more than doubled.
• The lone exception was the environmental and infrastructure group, where revenue fell 26 percent. That division is the company's second largest. Shaw Group said revenue was lower in the unit because 2006 third quarter numbers were inflated by "significant" amounts of disaster relief and emergency response services.

As I mentioned, I sold this out of the portfolio at $67, but I just put a limit order back in at this morning's gap, at $62.50. Due to previous accounting issues and my unfamiliarity with the stock over the long run, I did not have a huge position but it was simply a part of the basket of infrastructure stocks I own. (Others are McDermott, Foster Wheeler, KBR, Jacobs Engineering, and Perini)

Remember the name of the fund; a rising tide lifts all boats - Shaw is the black sheep of the group. That backlog increase is sick. They do about $6 Billion in revenue a year so we are talking booked contracts out 2 years! Analysts are looking for $2.33 next year out of Shaw Group - of course that has to go up, but on that number the stock is trading at a forward PE of 28. Not cheap, as this whole group has rocketed up. But point is, on any market pullbacks this is one of the main groups you need to be in. Period.

Disclosure: Long all names in fund but (ironically) Shaw Group; no personal position

Comments

[voidoid99]

After spending several hours researching Shaw Group I think the stock goes to $100. It is cheaper than Foster Wheeler and has a $12 billion dollar order backlog

[voidoid99]

After spending several hours researching Shaw Group I think the stock goes to $100. It is cheaper than Foster Wheeler and has a $12 billion dollar order backlog