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LB Foster Lags Q3 Earnings & Revenues, Provides Outlook

Premium railroads company LB Foster Co.FSTR reported weak results for third-quarter 2015. Quarterly earnings of 67 cents per share missed the Zacks Consensus Estimate of 73 cents and were down 23.9% year over year.

L. B. Foster Company (FSTR) - Earnings Surprise | FindTheCompany

Revenues

Total sales for the quarter were $176.1 million, up 4.9% year over year. The year-over-year improvement was primarily driven by increased sales in the company's Construction as well as Tubular and Energy Services segments. However, the top line lagged the Zacks Consensus Estimate of $196 million.

Revenues from Rail Products and Services segment decreased 13.8% year over year to $88 million. The decline was triggered by weakness in Union Pacific Railroad sales, lower steel prices and feeble performance of the rail division, led by lower steel prices and sales volumes.

Construction Products revenues increased 8.4% year over year to $54.1 million. The improvement was primarily attributable to stronger sales in pre-cast building division.

The Tubular and Energy Services segment generated revenues of $34 million, up 115.4% year over year. The remarkable improvement was supported by better sales in the company's acquired energy businesses.

Costs/Margins

Gross profit margin in the quarter was 20.47%, down 48 basis points (bps) year over year, primarily aided by improved Construction segment margins.

Selling and administrative expenses totaled $21.6 million, up from $20.6 million incurred in the year-ago quarter. The rise in expenses was primarily led by the company's acquisition and integration-related costs.

The Rail Products and Services segment recorded an adjusted gross profit margin of 23%, up 10 bps year over year, backed by improved mix and margins in several product categories. However, this excluded the quarterly warranty-related charges of $0.7 million.

Construction Products segment's gross profit margin increased 130 bps year over year to 18.2%, aided by improved margins in the Fabricated Bridge Products and Piling Products divisions.

However, gross profit margin of the Tubular and Energy Services segment was 19.7%, down 70 bps year over year, owing to lower blended margins on account of the acquisitions.

Balance Sheet/Cash Flow

Exiting third-quarter 2015, LB Foster's cash and cash equivalents were approximately $33.2 million, down from $52 million at year-end 2014. Long-term debt was $206.2 million versus $25.8 million as on Dec 31, 2014.

At the end of the quarter, L.B. Foster generated cash worth $15.6 million from operating activities, down from $18.1 million of cash used in the year-ago period.

Outlook

Going forward, LB Foster aims to achieve greater efficiency with the help of certain integration activities. The company also intends to improve its near-term margins through cost-reduction measures across various business segments.

Based on current market scenario, LB Foster expects sales within $150-$154 million and earnings of 30 cents per share for fourth-quarter 2015.

Stocks to Consider

LB Foster currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include AK Steel Holding Corporation AKS , Broadridge Financial Solutions, Inc. BR and Core-Mark Holding Company, Inc. CORE . All three stocks hold a Zacks Rank #2 (Buy).

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BROADRIDGE FINL (BR): Free Stock Analysis Report

AK STEEL HLDG (AKS): Free Stock Analysis Report

CORE-MARK HLDG (CORE): Free Stock Analysis Report

FOSTER LB CO (FSTR): Free Stock Analysis Report

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


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

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