Foster Wheeler Crafts 52-Week High - Analyst Blog

On Jun 6, shares of Foster Wheeler AG FWLT scaled a new 52-week high of $34.70 per share. Strategic initiatives taken by management to improve the company's fundamentals, healthy order backlogs, new contract wins, strong performance of Foster Wheeler's Global Engineering and Construction (E&C) segment and its recent alliance with AMEC plc, fueled the momentum. The stock returned 46.2% in the 1-year period, higher than NASDAQ's return of 24.5%.

The company had reported first-quarter 2014 results with earnings of 19 cents per share, an increase of 5.5% year over year. However, the earnings fell 47.2% short of the Zacks Consensus Estimate of 36 cents.

The company has been benefiting from the continuing strength in the E&C while its Global Power Group also showed signs of improvement in the quarter. However, adverse tax conditions and additional asbestos related charges proved to be a drag on the company's financials.

Following the earnings release, the company's E&C group won a number of contracts in the past month. Notably, on May 29, E&C received a contract from Marubeni Corporation for the KazMunayGaz oil refinery based in Kazakhstan for providing engineering and material supplies and an air preheating system for the Terrace Wallsteam reformer heater. Prior to that, on May 20, the group, in a joint venture received a contract from LNG Canada Development Inc. for providing FEED and  project execution services for the proposed liquefied natural gas LNG export project, known as the LNG Canada Project, in Kitimat, British Columbia.  

Foster Wheeler has been a market leader in mid-stream and downstream oil and gas industry, providing it a competitive edge. However, the company was witnessing urgent need for capacity additions in a number of developing countries. The company's proposed acquisition by AMEC, while meeting these requirements, will also complement its long-term objective of expansion across diverse sectors including upstream, minerals and metals.

For 2014, the Zacks Consensus Estimate for this stock is currently pegged at $1.79 per share, which reflects impressive year-over-year growth of 42.9%. For 2015, the Zacks Consensus Estimate is $2.24 per share, marking a year-over-year rise of 25.2%.

Foster Wheeler's solid fundamentals continue to aid growth while keeping up its credibility to earn more deals even after it signed a definitive sell-off agreement with a rival company. The expected long-term earnings growth rate for the stock is 12%.

Foster Wheeler currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Emcor Group Inc. EME, Sterling Construction Co. Inc. STRL and Tutor Perini Corporation TPC. All three carry a Zacks Rank #2 (Buy).