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Foster Wheeler AG (FWLT - Analyst Report) is set to report second quarter 2014 results on Aug 9. Last quarter it posted a 6.7% negative surprise. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

Overall, Foster Wheeler witnessed lower orders in its two operating segments. In the past quarter, the Global Engineering and Construction segment reported 30% decline in new order bookings. The orders mainly comprised many small and medium-sized contracts.  Further, the segment was also impacted by loss arising from mark-to-market foreign currency losses. In addition, the Global Power Group also reported a 23% decline in new orders, which was attributable to a lack of boiler orders.     

Earnings Whispers?

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

Negative Zacks ESP (Read: Zacks Earnings ESP: A Better Method):  That is because the Most Accurate Estimate stands at 30 cents while the Zacks Consensus Estimate is lower at 33 cents. That is a difference of -9.09%.

Zacks  Rank #3 (Hold): Foster Wheeler’s Zacks  Rank #3 (Hold) lowers the predictive power of ESP because the Zacks  Rank #3 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:  

Clayton William Energy, Inc.(CWEI - Snapshot Report), Earnings ESP of 10.6% and Zacks Rank #1 (Strong Buy)

Carrizo Oil & Gas Inc. (CRZO - Snapshot Report), Earnings ESP of 3.64% and Zacks Rank #2 (Buy)

Memorial production Partners LP(MEMP - Snapshot Report), Earnings ESP of 4.76% and Zacks Rank #2 (Buy)

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