Foster Wheeler AG
) reported first-quarter 2014 adjusted income (excluding the impact
of one-time items) of $19.1 million or 19 cents per share. Earnings
fell 47.2% short of the Zacks Consensus Estimate of 36 cents. In
the prior year quarter, the company had reported an income of $18.9
million or 18 cents per share. On a GAAP basis, the company
reported earnings of $17.1 million or 17 cents per share, compared
with an income of $16.9 million or 16 cents per share in
The earnings in the quarter were impacted by the decrease in
operating earnings before interest, taxes, depreciation, and
amortization (EBITDA) along with an increase in the effective tax
rate. The GAAP earnings were impacted by the additional asbestos
related charges in the quarter. However, the company has been
taking persistent efforts to optimize its cost structure, which is
reflected in the year-over-year growth. The company has also been
benefiting from the continuing strength in the Global Engineering
and Construction while its Global Power Group also showed signs of
improvement in the quarter.
The company's operating revenues in the quarter were $733.7
million, a decline of 17.1% compared with $790.1 million reported
in the prior year. The company's revenues declined due to the
sluggishness in the Global Power group despite strong growth in the
Global Engineering and Construction group. Also, the top line was
impacted by lesser-than-anticipated profit enhancement
opportunities coupled with an unfavorable utilization rate.
Revenues were also well below the Zacks Consensus Estimate of $889
million. However, the company reported strong
consolidated scope backlog level of over $3.8 billion, reflecting a
year-over-year increase of more than 28%.
Global Engineering and Construction
(E&C) group's operating revenues stood at $553.3 million, while
its operating revenues (FW scope) were $443.6 million, up 4.5% from
$424.7 million in the prior-year period. Revenue growth was driven
by increased volume of work and a healthy backlog level.
Global Power Group
(GPG) operating revenues stood at $180.4 million, while its
operating revenues (FW Scope) were $178.1 million, down 10.5% from
$199.3 million in the year-ago quarter. The decline was
attributable to a continued decrease in the volume of boiler
orders. However, in the quarter the segment reported a healthy
increase in backlog level, which is expected to lead to improved
segment revenues going forward.
Income & Expenses
Contract profit in the quarter was $115.5 million, down 3.3%
from the prior-year quarter, primarily due to a decline in
operating revenues. The company's selling, general and
administrative expenses (SG&A) expense stood at $82.0 million,
declining from $90.3 million in the year-ago quarter.
E&C's EBITDA was $40.0 million in the quarter, up from $35.2
million in the prior-year quarter. GPG's EBITDA was $28.7 million,
an increase from $24.7 million in the prior-year quarter.
Exiting the quarter, the company's cash and cash equivalents
were $527.9 million, down from $556.2 million at the end of Dec 31,
2013. Long-term debt was $113.0 million, marginally down from
$113.7 million at the end of Dec 31, 2013. Shareholders' equity was
$774.1 million, down from $750.1 million at the end of Dec 31,
Foster Wheeler remains positive about its growth in 2014, owing
to the healthy backlog and new wins, especially the performance of
its E&C segment. The company also expects its utilization rate
in the year to benefit significantly from the increasing volume in
Also, the company's recent alliance with AMEC is expected to aid
growth going forward by expanding its production capacity.
Alongside, it is likely to strengthen the vertical supply
Foster Wheeler's shareholders have approved the proposed cash
dividend of 40 cents per share that is to be paid on May 21, 2014,
to shareholders of record as of May 7, 2014.
Foster currently carries a Zacks Rank #4 (Sell).
Performance of Other Stocks in the Same Sector
EMCOR Group Inc.
) reported robust first-quarter 2014 results with adjusted earnings
of 64 cents per share easily surpassing the Zacks Consensus
Estimate of 53 cents.
Quanta Services Inc.
) reported first-quarter 2014 non-GAAP earnings of 44 cents a
share, beating the Zacks Consensus Estimate of 37 cents a
AECOM Technology Corporation
) reported earnings of 41 cents a share for second-quarter fiscal
2014, which was in line with the Zacks Consensus Estimate.
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