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CIMIC share price lower on first quarter update: Time to invest?

In morning trade the CIMIC Group Ltd (ASX: CIM) share price has edged 0.5% lower following the release of the engineering company’s first quarter update.

Here’s a summary of how CIMIC performed compared to the prior corresponding period:

  • Revenue came in 6% higher at $3.4 billion.
  • Net profit after tax grew 5% to $181 million.
  • Cash flow from operations up 60% to $248 million.
  • Net cash increased $700 million to $1.6 billion.
  • Outlook: NPAT guidance of $790 million to $840 million confirmed.

This strong quarterly result was driven by solid performances across all of CIMIC’s operating companies.

The company’s CEO, Michael Wright, was pleased the quarter.

He said: “Driven by a rigorous focus on operational delivery and risk management we continue to create valued outcomes for our clients. Our recent success in both the PPP and Alliance packages for Brisbane’s $5.4 billion Cross River Rail is a prime example in which we’ve been able to offer a unique solution to our client that delivers the best of CIMIC Group, drawing together specialist skills across our companies.”

The good news for shareholders is that there is a significant pipeline of potential work that could support its future growth.

According to the release, management estimates that there are almost $110 billion of tenders to be bid and awarded during the rest of 2019. And in 2020 and beyond, the company has its eyes on a further $320 billion of tenders. Approximately $130 billion of these are related to public private partnership projects.

Should you invest?

Given the large number of infrastructure projects that are planned, it could be worth considering a little exposure to the sector.

And thanks to its portfolio of high quality companies, CIMIC could be one of the better options. Especially after this solid first quarter performance and its positive outlook.

Other options to consider are Cardno Limited (ASX: CDD) and Downer EDI Limited (ASX: DOW).

But if you're not keen on companies like CIMIC then I think these top blue chips would be great options.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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