Foster Wheeler AG reported fourth-quarter 2013 adjusted income (excluding the impact of one-time items) of $2.8 million or 3 cents per share. Earnings were 92.7% below the Zacks Consensus Estimate of 41 cents. In the prior year, the company had reported an income of $41.3 million or 39 cents per share. On a GAAP basis, the company reported a loss of $37.2 million or 38 cents per share, compared with an income of $18.6 million or 18 cents per share in fourth-quarter 2012.
The earnings in the quarter were impacted by the additional charges comprising of pretax impairments and charges owing to ongoing restructuring initiatives and a provision for the non-U.S. jurisdiction tax audit.
For full-year 2013, the company reported adjusted income of $127.1 million or $1.25 per share compared with $179.1 million or $1.66 per share reported in 2012.
Despite missing estimates, investors remain optimistic given the company’s strong order growth and backlog levels. This translated to a rise in share price by 0.2% to close at $32.12 on Feb 28.
The company’s operating revenues in the quarter were $851.1 million, up 16.6% year over year. Strong growth in the Global Engineering and Construction group and an ongoing recovery in the Global Power group aided the year-over-year improvement. However revenues were well below the Zacks Consensus Estimate of $867 million.
Global Engineering and Construction (E&C) group’s operating revenues stood at $646.9 million, while its operating revenues (FW scope) were $500.0 million, up 17.9% from $424.0 million in the prior-year period. Revenue growth was driven by increased volume of work and a healthy backlog level.
Global Power Group (GPG) operating revenues stood at $204.2 million, while its operating revenues (FW Scope) were $201.8 million, down 9.2% from $222.3 million in the year-ago quarter. The decline was attributable to lower volume of boiler orders. New orders in the segment were up 88.5% year over year to $230 million from $122 million in the fourth quarter of 2012. Orders were driven by the booking of the large circulating fluidized bed boiler contract in South Korea.
Income & Expenses
Contract profit in the quarter was $132.5 million, down 15.5% from the prior-year quarter, primarily due to higher costs of operating revenues. SG&A expense was $92.0 million, up 4.3% from $88.2 million in the year-ago quarter.
E&C’s earnings before interest, taxes, depreciation, and amortization (EBITDA) was $26.6 million in the quarter, down from $53.4 million in the prior-year quarter. GPG's EBITDA was $31.5 million down from $46.2 million in the prior-year quarter.
Exiting the year, the company’s cash and cash equivalents were $556.2 million, down from $582 million at the end of Dec 31, 2012. Long-term debt was $113.7 million, down from $124.0 million at the end of Dec 31, 2012. Shareholders’ equity was $750.0 million, down from $713.9 million at the end of Dec 31, 2012.
The company remains positive about its growth in 2014 owing to the healthy backlog and new wins, especially, the performance of its E&C segment. However, it expects the first-quarter 2014 earnings to be negatively impacted by the existing volatility in the business.
Foster Wheeler signed a definitive sell-off agreement recently, on Feb 13, with a U.K. based company AMEC. Per the agreement, AMEC will be acquiring all the issued and to-be-issued share capital of Foster Wheeler for about $3.3 billion or $32.69 per share. The company’s existing shareholders will have a 23% stake in the combined entity.
Foster Wheeler’s board of directors has also proposed a cash dividend of 40 cents per share to be paid around May 21, 2014, to shareholders of record as of May 7, 2014.
Foster currently carries a Zacks Rank #3 (Hold).
Performance of Other Stocks in the Same Sector
Chicago Bridge & Iron Co. N.V. (CBI - Analyst Report) posted fourth-quarter adjusted earnings of $230.0 million or $1.91 per share, which easily beat the Zacks Consensus Estimate of $1.17 per share.
Quanta Services Inc. (PWR - Analyst Report) reported fourth-quarter 2013 non-GAAP earnings of 50 cents per share, beating the Zacks Consensus Estimate by 22%.
Fluor Corporation's (FLR - Analyst Report) fourth-quarter 2013 net earnings of $167 million or $1.01 per share surpassed the Zacks Consensus Estimate of 98 cents by 3.1%.