Shaw Group Digs In Ahead of Earnings (SGR)

Shaw Group Inc. (NYSE: SGR) is set to report earnings today after the close.  We have First Call estimates as being $0.63 EPS on $1.89 Billion in revenues.  Estimates for next quarter are $0.73 EPS on $1.94 Billion revenues, which also marks the company’s year-end.  If the company dares to offer any Fiscal August 2009 targets, First Call has estimates at $3.27 EPS on $8.49 Billion (represents expected growth of 42% on EPS and 18% on revenues).

Shaw is in an interesting position with such a pullback that has been witnessed.  This company is the true vertical winner for any and all energy plant infrastructure on a global basis whether you want to build or retool plants from top to bottom in fossil fuels or nuclear plants.  At $55.83, shares are down literally 30% from their 52-week highs.

Options are a bit hard to use because the strike prices are so wide, but options traders appear to only be pricing in a move of $2.35 to $2.90 in either direction.  Interestingly enough, some options speculation has take place this afternoon in the JUL08 $60.00 Calls that expire at the end of next week.

Analysts have an average price target in the mid-$60’s and there really hasn’t been any meaningful analyst shift in quite some time as analysts did most of their downgrades in 2007.

One of Shaw’s key issues is that its past has never entirely been forgiven  despite an exponential rise over the last five years.  This is partly because of a sporadic history of late when it comes to earnings, which makes it a wonder that options traders are only looking for a 5% or 6% max move.  As of the second reading in June, Shaw had 4.19 million shares listed in the short interest, which is about 2.2 days-to-cover.

Jon C. Ogg
July 9, 2008