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Momentum

Shares of L.B. Foster Company (FSTR - Analyst Report) have been gaining since its healthy third quarter earnings beat last month. In fact, this maker of rail, construction and energy products hit a new 52-week high on December 10, 2012, and has advanced roughly 44% year-to-date. This Zacks #2 Rank (“Buy”) stands to gain from strength across rail and tubular markets.

L.B. Foster Trumps Estimates in Q3

On November 1, L.B. Foster reported third-quarter adjusted earnings from continuing operations of $1.00 per share, topping the Zacks Consensus Estimate by more than 12%.

Net sales jumped 7.6% year over year to roughly $170.3 million, beating the Zacks Consensus Estimate of $168 million. Strong sales across the Rail and Tubular segments more than offset a double-digit decline in sales for the Construction division.

Sales from the Rail segment climbed 24.2% to around $111 million, buoyed by strong sales from new rail and concrete tie businesses. Revenues from the Tubular division surged 52.9% to $13.4 million on strength across energy and agriculture end markets. But weak market conditions impacted construction sales in the quarter, which slipped 23.6% to $45.9 million.

L.B. Foster sold its Precise Structural Products division to Cianbro Fabrication and Coating Corporation during the third quarter. The division was a part of its Construction segment. The company envisions healthy trends across rail and energy markets and a rebound in the construction market will position it for higher growth in 2013.

Earnings Estimates Going Up

For 2012, both estimates have been revised higher in the last 60 days, raising the Zacks Consensus Estimate by roughly 5% to $2.91 a share. This indicates an estimated annualized growth of roughly 18.8%.

On a similar note, both estimates have moved higher for 2013 over the same period. The Zacks Consensus Estimate for 2013 is up roughly 1.5% to $3.48 per share, representing a projected year-over-year growth of around 19.4%.

Reasonable Valuation

L.B. Foster is currently trading at a forward P/E of 14.29x, a roughly 8.7% discount to the peer group average of 15.66x. The price-to-book of 1.5x is, however, higher than the peer group average of 1.03x. Moreover, price-to-sales of 0.71x is also above the peer group average of 0.45x. The valuation looks reasonable considering the company’s earnings growth trajectory.

Healthy Technicals and Performance

Technical indicators show that L.B. Foster has been trading above its 200-day moving average since July 2012. Moreover, the stock broke above its 50-day moving average in October 2012.

On the performance front, L.B. Foster has outperformed the S&P 500 over the past year delivering a return of roughly 47%, versus around 16% for the benchmark.

Founded in 1902, L.B. Foster Company makes and distributes products and services for application in the rail, construction, energy and utility end markets. Its offerings include heavy and light rail, concrete ties, rail accessories, steel sheet piling, pipe, fabricated highway products, fusion bond and other corrosion protection coatings and special pipe products. The company, which has a market cap of around $422 million, markets its product directly across the U.S., Canada and the UK.


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