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Foster Wheeler AG (FWLT - Analyst Report) reported earnings per share (excluding the impact of one-time items) of 54 cents in the second quarter of 2013. Earnings were 63.6% above the Zacks Consensus Estimate of 33 cents. The quarter's results were also up 22% from the prior-year quarter, primarily driven by strong performance of the Global Engineering and Construction group.  

Total Revenue

Consolidated operating revenues in the quarter were $642 million, down 6.3% year over year. Strong growth in the Global Engineering and Construction group was fully offset by a steep decline in the Global Power group. Revenues were well below the Zacks Consensus Estimate of $866 million.    

Segment Results

Global Engineering and Construction(E&C) group’s operating revenues (FW scope) were $443 million, up 6.2% from $417 million in the prior-year period. The segment reported a 37% surge in new orders during the quarter. New orders for the segment in the reported quarter grew 37% to $537 million from $392 million.

Global Power Group(GPG) operating revenues (FW Scope) were $199 million, down 25.7% from $268 million in the year-ago quarter. New orders in the segment were down 22.0% year over year to $89 million from $114 million. The decline was attributable to slippage of award dates for committed key prospects, which resulted in a lack of boiler orders.  

Income & Expenses

Contract profit in the quarter was $153.6 million, up 10.6% from the prior-year quarter, primarily driven by lower operating revenues. SG&A expense was $89.8 million, up 5.3% from $85.3 million in the year-ago quarter.

E&C EBTDA margin was 14.0% in the quarter, up from 9.6% in the prior year quarter. GPG EBITDA margin was 22.9%, up from 15.7% in the prior year quarter. 

Balance Sheet 

Cash and cash equivalents as of Jun 30, 2013, were $414.7 million, down from $582.3 million at the end of Dec 31, 2012. Long-term debt was $115.7 million, down from $124.0 million at the end of Dec 31, 2012. Shareholders’ equity was $646.9 million, down from $713.9 million at the end of Dec 31, 2011.

During the reported quarter, the company repurchased 5,092,700 shares for about $116 million. As of Jun 30, 2013, the company had approximately $270 million remaining under its authorized share repurchase program.


Following the earnings release, Foster raised its full-year earnings guidance marginally to be above $1.54, up from previous guidance of earnings of flat to moderately below $1.54. The company’s encouraging performance in the second quarter of 2013 drove the guidance higher.

Foster currently has a Zacks Rank #3 (Hold). Other companies in the same industry and worth considering at the moment are VSE Corp. (VSEC - Snapshot Report), AO Smith Corp. (AOS - Snapshot Report) and Rexnord Corporation (RXN - Analyst Report). All three have a Zacks Rank #2 (Buy).

Note: Foster Wheeler Scope (FW Scope) represents the portion of backlog, new orders booked and operating revenues on which profit can be earned.

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