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Zacks Investment Research downgraded LB Foster Co. (FSTR - Analyst Report) to a Zacks Rank #5 (Strong Sell) on Aug 10, based on weak second-quarter 2013 results combined with a weak outlook for the quarters ahead.

Why the Downgrade?

Foster reported adjusted earnings per share of 71 cents in the second quarter of 2013, missing the Zacks Consensus Estimate of 97 cents by 26.8%. Revenues came in at $149.9 million, missing the Zacks Consensus Estimate of $175.0 million as well as the year-ago quarter’s revenues by 8.1%.

The company’s Rail and Construction segments faced a year-over-year decline in revenues. The Rail segment was impacted by a reduction in both concrete tie sales and rail technologies businesses. The Construction segment’s sales were affected due to a reduction in the sales of fabricated bridge business and the piling product lines.

Total backlog for Foster declined 12.6% year over year to $220.3 million as a result of a 79.0% decline in the Tubular segment’s backlog.

In the coming quarters, bookings in the Tubular segment are expected to drop further, leading to a decline in total revenue. The Rail segment is also expected to remain in doldrums. However, some improvement in the Construction segment is anticipated.

Subsequent to the results, Foster has witnessed a downward revision for all of its estimates for the years 2013 and 2014. The downward revisions for 2013 have lowered the Zacks Consensus Estimate by 12.5% to $2.73 per share over the last 7 days. The Zacks Consensus Estimate for 2014 was also reduced by 7.7% to $3.35 per share during the same period.

Other Stocks to Consider

Other steel companies stocks that are worth a look include Ternium S.A. (TX - Snapshot Report), Angang Steel Company Limited (ANGGY) and Kobe Steel Ltd. . While Ternium carries a Zacks Rank #1 (Strong Buy), Angang Steel and Kobe Steel carry a Zacks Rank #2 (Buy).

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