On April 10, 2014, we issued an updated research report on
Foster Wheeler AG
). In the recent past, the company's business has been benefiting
from its proposed acquisition by AMEC plc, initiatives taken to
improve its fundamentals and continued contract wins.
FOSTER WHELR AG (FWLT): Free Stock Analysis
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Foster Wheeler signed a definitive sell-off agreement on Feb 13,
with a U.K.-based company, AMEC plc. The stock has been on
uptrend since then, gaining nearly 32% to date.
Foster Wheeler is witnessing a growing need for capacity
additions in a number of developing countries. The alliance with
AMEC will lead to an expansion of production capacity while
increasing efficiency across the vertical supply-chain.
Foster Wheeler has recently received a number of contracts for
front-end engineering work and subsequent significant work for
engineering, procurement and construction. The trend is likely to
continue as the company expects the global demand for electrical
energy to increase and solid-fuel-fired steam generators to play
a significant role in meeting the energy demand. Moreover,
clients are expected to continue investing in new and advanced
technology to meet the rising demand for energy.
Moreover, the company is focused on strengthening its business
and gaining market share through strategic acquisitions to enrich
its product portfolio. As part of its endeavors, in March, the
company announced that it would be taking over South Africa-based
mining company, MDM Engineering Group Ltd. for approximately $109
million and Siemens Environmental Systems and Services business
from Siemens Energy, Inc. for an undisclosed amount.
However, several market constraints impacted the company's top
and bottom lines in its fourth-quarter 2013 results. These
factors include short-term sluggishness in the power generation
segment across the globe, changing environmental regulations in
Europe and low
in many regions that delayed the retrofit markets. Moreover, the
price of natural gas is expected to be on decline for as many as
three to five years ahead, owing to the increasing availability
of the gas.
The company is also exposed to severe risks due to its
acquisitions.Though acquisitions are expected to add to the
company's growth, there are significant integration risks. The
company's proposed acquisition by AMEC plc. is likely to close in
the second half of 2014, which may drag its results in the near
Also, the projects included in the company's backlog are usually
long-cycle projects which may also be delayed or cancelled,
thereby impacting Foster Wheeler's operations and cash flows.
Stocks That Warrant a Look
At present, Foster Wheeler has a Zacks Rank #3 (Hold). However,
some better-ranked players in the engineering and heavy industry
that are worth a look include
Pernix Group Inc
Quanta Services, Inc.
). While Pernix Group sports a Zacks Rank #1 (Strong Buy), Quanta
Services and VESC havea Zacks Rank #2 (Buy).