We reaffirmed our long-term Neutral recommendation on
L.B. Foster Company
) on Jun 10, 2013, as risk reward remains fairly balanced for the
stock at this juncture.
Why the reiteration?
Foster reported impressive results for the first quarter of
2013 with earnings per share of 48 cents, increasing 65.5% year
over year. Earnings also surpassed the Zacks Consensus Estimate
of 40 cents by 20.0%, led by an increase in revenue as well as
Revenue for first quarter 2013 was $129.3 million, up 13.2%
year over year, with a steady improvement in the Rail as well as
Tubular segments. However, the rise was partially offset by a
decline in the Construction segment. Margin management by Foster
also played an important role in improving the results.
Rail and Tubular segments of Foster have been performing well
over the past few quarters and are expected to contribute further
to the company's growth, moving forward. Its Rail segment
registered a year-over-year increase of 22.2% in the first
quarter of 2013, followed by the Tubular segment, which
experienced an increase of 19.5% year over year. Moreover,
management's expectations for future growth are reinforced by the
belief that Foster's new facility in Magnolia, TX, will
contribute significantly to the Tubular segment.
Moreover, Foster has a strong balance sheet with minimal
long-term debt. It also expects to turn cash flow from operations
to positive by the third quarter of 2013. A strong backlog also
plays in favor of the company.
However, the uncertainty revolving around the price and
availability of Foster's primary raw material, steel, cannot be
negated. Although Foster lacks direct competitors, it faces stiff
competition from various companies for each of its product
offerings. Also, being a company with its operations scattered
outside the U.S., Foster is prone to foreign currency exchange
Other Stocks to Consider
Foster currently carries a Zacks Rank #2 (Buy). Other steel
producing companies worth a look are
Kobe Steel Ltd.
Shiloh Industries Inc.
), both carrying a Zacks Rank #1 (Strong Buy); whereas,
Angang Steel Company Limited
) carries a Zacks Rank #2 (Buy).
ANGANG STEEL LT (ANGGY): Get Free Report
FOSTER LB CO (FSTR): Free Stock Analysis
KOBE STEEL-ADR (KBSTY): Get Free Report
SHILOH INDS INC (SHLO): Get Free Report
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