FWLT (MM)

Foster Wheeler AG (FWLT) reported second-quarter 2011 earnings per share from continuing operations of 53 cents compared with 48 cents in the prior-year quarter. The company outperformed the Zacks Consensus Estimate of 35 cents.

Including asbestos related provision of 1 cent, earnings per share in the quarter came in at 52 cents compared with 46 cents (no asbestos related provision) in the prior-year quarter. Net income in the quarter increased sharply by 17% year over year, aided by good performance in Global Power Group (GPG).

Total Revenue

Consolidated operating revenue in the quarter was $1.18 billion compared with $1.01 billion in the prior-year period.

Segment Result

Global Engineering and Construction (E&C) Group operating revenue was $365 million compared with $454 million in the prior-year period. The segment revenue in the quarter was affected by lower volume of work executed. New orders declined to $381 million from $488 million due to lower-than-expected new awards.

Global Power Group (GPG) operating revenue increased to $289 million from $160 million in the prior-year period as volume of boiler work increased. New order in the segment increased to $574 million compared with $162 million in the prior-year period.

Income & Expenses

Contract profit in the quarter was $153.6 million compared with $147.9 million in the prior-year quarter. SG&A expense was $80.4 million compared with $69.5 million.

E&C EBTDA was $55 million in the quarter compared with $86 million in the prior-year quarter and GPG EBITDA was $68 million compared with $26 million in the year-ago comparable period.

Balance Sheet

Cash and cash equivalents at the end of the quarter was $1.04 billion compared with $1.57 million at the end of 2010. Long-term debt was $158.2 million compared with $152.6 million and shareholders’ equity was $1.03 billion compared with $1.02 billion at the end of 2010.

During the second quarter of 2011, the company repurchased 3,855,847 shares for approximately $131 million. The company had $341 million remaining under its authorized share repurchase program as of June 30, 2011.

Outlook

The company expects Global E&C Group scope revenue to increase in the second half of 2011 but remain flat for full-year 2011 compared with 2010. Backlog at the end of 2011 is expected to be more than 2010. For 2011, the segment EBITDA margin is expected in the range of 13%–15%.

Global Power Group scope revenue is expected to be up sharply in 2011 versus 2010.  The segment EBITDA margin on scope revenue in 2011 increased to a range of 17%–19%.

Foster Wheeler AG is based in Zug Switzerland, but its operational headquarters are in Clinton NJ USA. The majority of Foster’s revenues and new businesses originate from outside the United States.  The company serves the following industries: Oil and Gas; Oil Refining; Chemical & Petrochemical; Pharmaceutical; Environmental; Power Generation; and Power Plant Operation and Maintenance. Major competitors of Foster Wheeler are Fluor Corporation (FLR) and Jacobs Engineering Group Inc. (JEC).

We continue to maintain a Neutral rating on Foster Wheeler, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

 
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