Foster Wheeler Reiterates at Neutral - Analyst Blog
June 27 2012 - 12:35PM
Zacks
We maintain a Neutral recommendation on Foster Wheeler
AG (FWLT).
The company delivered a robust operating performance during the
first quarter of 2012, with its net income witnessing growth of
about 76% while consolidated revenue increased by 9.9%. Foster
Wheeler saw an improvement in demand for its services globally,
resulting in an increase of scope backlog during the quarter.
However, given the nature of the company’s businesses, the
company is subjected to various environmental laws and regulations
in the countries in which it operates, failing which it will have
to pay huge penalties.
Since the company’s operations are primarily concentrated in
four industries -- oil & gas, oil refining,
chemical/petrochemical and power -- the completion of its projects
takes a long time, and has an impact on the company’s current cash
flows. Therefore, though the company has been performing well, we
currently maintain a Neutral recommendation on the stock.
Foster Wheeler has felt a growing need for capacity additions in
a number of developing countries, all of which have a preference
for solid fuel boilers. The company’s CFB technology continues to
be its preferred solid fuel technology when a client has a
hard-to-burn fuel or needs flexibility in fuel type. We believe
that world demand for energy will continue to grow over the long
term and that clients will continue to invest in new and upgraded
capacity to meet that demand.
In first-quarter 2012, the company received a number of small
and medium size contracts, above the average quarter of 2011. The
increased activity reflects Foster’s strong position in a wide
range of markets across both business lines and geographies. The
company is successfully executing its previous backlog, deriving
significant benefit from them. Foster Wheeler expects to see
increased revenue in 2012 on a year-over-year basis.
However, during first-quarter 2012, EBITDA for E&C Group
declined compared with the average quarter of 2011 (from $41.7
million to $46.9 million) due to higher sales pursuit costs and a
decline in equity earnings from partially owned power projects in
Italy. This, however, was offset by rise in EBITDA for GPG.
Foster Wheeler AG is based in Zug, Switzerland, but its
operational headquarters are in Clinton, NJ. The company operates
through two business groups: the Global Engineering and
Construction Group -- or Global E&C Group -- and the Global
Power Group. Major competitors of the company are Fluor
Corporation (FLR) and Jacobs Engineering Group
Inc. (JEC).
Foster Wheeler currently has a Zacks #3 Rank (Hold recommendation)
over the next one-to-three months.
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
FOSTER WHELR AG (FWLT): Free Stock Analysis Report
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
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