The Coming Energy Boom
I believe we are in the early innings of an energy renaissance in North America. One area of particular interest is the expansion of the natural gas infrastructure as it takes more market share from coal and as massive new projects get under way to build the facilities needed to export natural gas. The Federal Energy Regulatory Commission's decision to approve Cheniere Energy's (LNG) proposal to build the nation's largest natural-gas export terminal in Louisiana should kick off an avalanche of similar projects.
The companies that supply the pipes, steel, know-how and other materials and products should benefit greatly over the next decade as the U.S. capitalizes on its huge bounty of new energy sources. Here are three companies I believe will benefit and should be considered as investments to take advantage of this long-term trend.
Chicago Bridge & Iron Co. (CBI) provides conceptual design, engineering and construction services to energy and natural resource industries worldwide.
Four reasons CBI is a long-term bargain at $44 a share:
- CBI will be one of the primary firms employed to build these huge LNG facilities.
- Analysts expect very solid growth from the company over the next two years. Projections call for 15% to 20% revenue growth for both FY2012 and FY2013, respectively.
- The stock is undervalued with a five-year projected Price/Earnings/Growth ratio of 0.88 and a forward Price-to-Earnings ratio just below 13. It also has a solid balance sheet with more than $600 million in net cash (approximately 15% of its market capitalization).
- The median price target on CBI is a little north of $54 a share. Credit Suisse has an Outperform rating and a $58 price target on the company.