Will Foster's Earnings Miss Again? - Analyst Blog


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Foster Wheeler AG ( FWLT ) is set to report its first quarter 2013 results on May 2. Last quarter, it posted a 17.4% negative surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Foster Wheeler reported weak fourth quarter 2012 results compared to a reasonably strong fourth quarter of 2011. The company reported a 30.8% decline in adjusted earnings per share and the backlog also dropped on a year-over-year basis.  The decline was mainly because of missing out on key dates for committed projects. Further, power generation markets globally continue to be relatively weak. Unstable environmental regulations in Europe coupled with low natural gas prices in the U.S. have delayed or dampened the retrofit markets. In addition, the markets for renewable power have been depressed in many regions due to overbuilding during the past decade and current government reluctance to continue subsidization.

Earnings Whispers?

Our proven model does not conclusively show that Foster is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method ) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Positive Zacks ESP:   That is because the Most Accurate Estimate stands at $0.15 while the Zacks Consensus Estimate is lower at $0.17. That is a difference of -11.8%.

Zacks #5 Rank (Strong Sell). Foster's Zacks #5 Rank (Strong Sell) lowers the predictive power of ESP because the Zacks #5 Rank when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

AECOM Technology Corporation ( ACM ) with Earnings ESP of 1.92% and a Zacks #2 Rank (Buy)

Chicago Bridge & Iron ( CBI ) with Earnings ESP of 1.33% and a Zacks #2 Rank (Buy)

KBR Inc. ( KBR ) with Earnings ESP of 1.79% and a  Zacks #3 Rank (Hold)

AECOM TECH CORP (ACM): Free Stock Analysis Report

CHICAGO BRIDGE (CBI): Free Stock Analysis Report

FOSTER WHELR AG (FWLT): Free Stock Analysis Report

KBR INC (KBR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: ACM , CBI , FWLT , KBR

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