FWLT (MM)

Foster Wheeler AG (FWLT) reported fourth-quarter 2011 earnings per share from continuing operations of 39 cents compared with 31 cents in the prior-year quarter. The company underperformed the Zacks Consensus Estimate of 45 cents.

Including asbestos related provision of 5 cents, earnings per share in the quarter came in at 34 cents compared with 26 cents (asbestos related gain of 5 cent) in the prior-year quarter.

For 2011, earnings per share from continuing operations were $1.43 compared with $1.74 in 2010. The company outperformed the Zacks Consensus Estimate of $1.47. Including asbestos related provision, earnings per share in the year came in at $1.35 compared with $1.70 in 2010.

Total Revenue

Consolidated operating revenue in the quarter was $1.13 billion compared with $1.21 billion in the prior-year period. For 2011, consolidated operating revenue was $4.48 billion compared with $4.07 billion in 2010.

Segment Result

Global Engineering and Construction (E&C) Group’s operating revenue was $453.1 million compared with $398.8 million in the prior-year period. In the reported quarter, orders, which are generally of small and medium sizes, declined to $375.8 million from $561.5 million.

Global Power Group (GPG) operating revenue increased to $281.3 million from $234.5 million in the prior-year period due to increased volume. New order in the segment increased to $460.3 million compared with $419.8 million in the prior-year period. Increased order was aided by large order for circulating fluidized bed (CFB) technology.

Income & Expenses

Contract profit in the quarter was $152.5 million compared with $138.9 million in the prior-year quarter. SG&A expense was $80.7 million compared with $89.9 million.

E&C EBTDA was $55.4 million in the quarter compared with $41.5 million in the prior-year quarter and GPG EBITDA was $55.0 million compared with $67.1 million in the year-ago comparable period.

Balance Sheet

Cash and cash equivalents at the end of 2011 were $718.0 million compared with $1.06 billion at the end of 2010. Long-term debt was $136.4 million compared with $152.6 million and shareholders’ equity was $735.7 million compared with $1.02 billion at the end of 2010.

During the third quarter of 2011, the company repurchased 8,998,475 shares for approximately $169 million. In January 2012, the company additionally repurchased 564,100 shares for approximately $10.9 million. With the recent increase by the board of directors in authorized share for repurchase, the company now has total availability of $500 million.

Outlook

The company expects Global E&C Group and Global Power Group scope revenue to increase in 2012 versus 2011.  Global E&C Group EBITDA margin on scope revenue in 2012 is expected to be in the range of 12%–14% and for Global Power Group in the range of 16%-18%.

Further, Foster Wheeler expects its earnings per share to increase significantly in 2012 versus 2011 with an expected rise in volume and a decline in share count.

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 maintain a Zacks #4 Rank (Sell recommendation) over the next one-to-three months on Foster Wheeler.

 
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