L.B. Foster Misses on Q1 Earnings, Revs - Analyst Blog

L.B. Foster Company FSTR posted earnings of 35 cents per share for first quarter 2014, down 27.1% from 48 cents in the year-ago quarter. Adjusted earnings also missed the Zacks Consensus Estimate of 45 cents by 22.2%. The year-over-year decrease in earnings was mainly a result of reduced sales.

Revenues: Total sales in the quarter were $111.4 million, down 13.8% year over year, primarily due to a decline experienced in all the business segments. Unfavorable weather conditions adversely impacted product demand due to project delays by customers. Revenues were below the Zacks Consensus Estimate of $122.0 million.

Revenues from the Rail Products segment decreased 9.7% year over year to $73.5 million. This resulted from softness in the rail distribution and transit businesses, partially offset by strong sales in the Rail Technology division.

The Construction Products segment's revenues dropped 25.6% year over year to $27.4 million due to weak piling products, partially offset by improved sales in the fabricated bridge products.

The Tubular Products segment generated revenues of $10.5 million, declining 5.2% year over year owing to lower coated products and threaded product sales. However, favorable impacts from the acquisition of Ball Winch in Dec 2013, helped counter the decline.

Costs/Margins: Gross profit margin in the quarter increased 250 basis points (bps) year over year to 21.7%. Selling and administrative expenses were recorded at $18.0 million, up from $17.1 million in the year-ago quarter.

The Rail Products segment recorded gross profit margin of 22.4%, expanding 150 bps year over year, attributable to an improvement in the rail technology business. The Construction Products segment's gross profit margin improved 740 bps from the year-ago quarter to 20.9%, as a result of favorable product mix. The gross profit margin of the Tubular Products segment was 20.2%, falling 870 bps year over year, due to de-leverage of volume along with a reduction in price.

Balance Sheet/Cash Flow: Exiting first quarter 2014, L.B. Foster's cash and cash equivalents were approximately $91.1 million compared with $64.6 million in the prior quarter. Total long-term debt balance stood at $319,000 versus $25,000 in the preceding quarter.

In the first quarter, L.B. Foster generated $32.1 million from operating activities versus $17.2 million of cash used in the year-ago quarter. Capital expenditure rose to $3.5 million from $1.0 million in the comparable prior-year quarter.

Outlook: Management expects a favorable business environment for all the segments in 2014. Sales are expected in the range of $620.0–$630.0 million, while the company predicts pretax income in the range of $43.0–$47.0 million, along with earnings per share in the $2.80-$3.00 range. Capital expenditure is expected in the range of $18.0–$22.0 million and the increase is expected to support the company's growth plans.

Other Stocks to Consider

L.B. Foster currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks worth considering in the machinery industry include Simpson Manufacturing Co., Inc. SSD, United Rentals, Inc. URI and Aegion Corporation AEGN. While Simpson Manufacturing and United Rentals sport a Zacks Rank #1 (Strong Buy), Aegion Corp. holds a Zacks Rank #2 (Buy).