Shaw Group: Solid Not Spectacular

Jul.11.08 | About: Shaw Group (SHAW)

Shaw Group (SGR) is a former fund holding we closed out a few months ago (quite poor timing on that one) [May 13: Closing Shaw Group] - not my favorite nor least favorite global infrastructure stock. The main kicker with Shaw is it's an ancillary play on the potential nuclear buildout coming to the world/US. Not a ton of year over year growth but it's been favored of late by the market (previous to this selloff in the group) due to the nuclear angle I believe.

Backlog is continuing to show impressive growth. Most of their work is in the US (negative) but it's with the unlimited pockets of the federal government (positive) as opposed to local governments. (a few quarters ago about 85% of their business was in the U.S.) They also have a lot of typical energy projects which we do like. Here are some highlights from it's earnings report last night.

  • The Shaw Group Inc. (NYSE: SGR - News) reported net income for the three months ended May 31, 2008, of $53.9 million, or $0.64 per diluted share, compared with $54.1 million, or $0.66 per diluted share in the third quarter of 2007. The reported results for the third quarter of 2008 include a net loss of $4.8 million, or $0.06 per diluted share, related to the Westinghouse segment. Excluding the Westinghouse segment, net income was a record $58.7 million, or $0.70 per diluted share.
  • Revenues for the third quarter fiscal 2008 grew 14 percent to a quarterly record of $1.8 billion, compared to $1.6 billion in the corresponding 2007 period.
  • Shaws backlog of unfilled orders at May 31, 2008, rose to a company record of $16.4 billion, up $3.1 billion or 23 percent from a year ago, and up 15 percent from the second quarter of 2008. The record backlog excludes the majority of the work expected to be performed under the EPC contracts signed during the quarter with Southern Company and SCANA, and the letter of intent signed with Progress Energy, for a total of six new Westinghouse AP1000TM nuclear reactors, as Shaw continues to operate under limited notices to proceed for these projects. Approximately $6.5 billion, or 40 percent, of the current backlog is expected to be converted to revenues during the next 12 months.
  • The record new awards in the quarter and our record backlog are indicative of Shaws position in its core markets today. Notably, the E&I segment added more than $2.7 billion in new awards during the quarter, and has nearly doubled its backlog to $5.2 billion. The increase in E&Is backlog was driven by the $2 billion contract modification for the Department of Energys MOX project in South Carolina and the $700 million Army Corps of Engineers Inner Harbor Navigation Canal Hurricane Protection Project in New Orleans. Looking ahead, we expect Shaws strategic position in the growing nuclear power market combined with our strong position in our traditional markets to drive revenue and earnings growth into fiscal 2009 and beyond, continued Mr. Bernhard.
  • Shaw continues to expect earnings per diluted share, excluding Westinghouse, to approximate $2.30 for the fiscal year 2008.

[Apr 9: Shaw Group Misses Its Numbers]

Disclosure: No position