On Mar 8, we downgraded engineering and construction company
Foster Wheeler AG
) to Underperform based on the company's dismal fourth quarter
results and disappointing outlook for full year 2013.
Why the Downgrade?
Estimates for Foster Wheeler have been declining ever since
its fourth quarter results on Mar 1. Foster Wheeler's fourth
quarter revenues and EPS of $735 million and 38 cents missed the
Zacks Consensus Estimates of $1 billion and 46 cents,
respectively. For the full year 2013, the company expects
adjusted diluted earnings per share to be flat to marginally down
compared to 2012.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for 2013 has gone down 25.8% to $1.52 per
share. The Zacks Consensus Estimate for 2014 has also declined
significantly (down 12.1% to $2.03 per share). With the Zacks
Consensus Estimates for both 2013 and 2014 going down, the
company now has a Zacks #5 Rank (Strong Sell).
Cause for Concern
Power generation markets globally continue to be weak.
Unstable environmental regulations in Europe and a similar
situation, coupled with low natural gas prices, in the U.S. also
have delayed or impacted the retrofit markets. In addition, the
markets for renewable power have also been low in many regions
due to overbuilding during the past decade and the current
government unwillingness to continue subsidization.
Given the fourth quarter performance and the challenging
outlook, we fail to see any significant catalyst that could drive
the shares in the near term. Gross margins will also remain under
With the negative sentiment continuing, the Zacks Consensus
Estimate for the first quarter also has gone down 28.9% to 32
Engineering & Construction Stocks That Warrant a
While we prefer to avoid Foster Wheeler until we see signs of
improvement in the company's performance, other engineering &
construction stocks worth a look are
Aecom Technology Corporation.
). Both are Zacks #2 Rank (Buy) stocks. Another competitor
) has good prospects but carries a Zacks Rank #3 (Hold).
AECOM TECH CORP (ACM): Free Stock Analysis
CHICAGO BRIDGE (CBI): Free Stock Analysis
FLUOR CORP-NEW (FLR): Free Stock Analysis
FOSTER WHELR AG (FWLT): Free Stock Analysis
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