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LB Foster's Dismal Trend Continues: Time to Sell the Stock?
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On Sep 12, 2016, we issued an updated research report on premium railroads manufacturing firm, LB Foster Co. (FSTR - Free Report) . The company offers a variety of non-imitable products and services to the rail, construction, energy and utility markets through its Rail, Products, Construction and Tubular Product segments. However, the company operates through a wide global network, which exposes it to stiff competition within the industry.
Bearish Factors
Weak infrastructure & maintenance spending, low piling & bridge products, test & inspection services and threaded & coated businesses sales are currently hurting LB Fosters’ revenues. The company also conducts its business in a highly competitive market. In order to lower risks of market share loss and increase competency in the market, LB Foster makes heavy investments toward new technological innovations. However, such expenses often go in vain, if the newly invented technology becomes obsolete.
Further, steel is used as the key raw material for most of LB Foster’s operations. However, its price and availability remain uncertain due to cyclicality of the steel industry. The company is also dependant on a few suppliers for its operations. In case, there is a disruption in adequate or timely supply of raw materials, the company may incur losses. Also, unfavorable changes in spending pattern of the government might delay or permanently defer LB Fosters’ ongoing or future projects. Therefore, availability of capital resources utilized by the company in its projects remains subject to certain uncertainties. Moreover, demand for the company’s products and services are sensitive to changes in customer order timings.
A Few Avenues
Though we remain apprehensive about the negatives weighing on this Zacks Rank #5 (Strong Sell) stock’s results in the near term, we expect certain favorable developments to partially offset such adversities. Bookings and backlog play an important role in determining the revenues of a construction company like Foster. In second-quarter 2016, bookings increased 12.7% year over year for the Construction Products segment. We believe that favorable bookings in the business segments will benefit the company's top line and profitability in the near term. Also, the company’s new Enterprise Resource Planning ('ERP') system is expected to generate benefits in the quarters ahead.
Stocks to Consider
Some better-ranked stocks within the industry include ArcelorMittal (MT - Free Report) , Angang Steel Company Limited and Ternium S.A. (TX - Free Report) . Both Angang Steel Company Limited and Ternium S.A. hold a Zacks Rank #2 (Buy), while ArcelorMittal sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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LB Foster's Dismal Trend Continues: Time to Sell the Stock?
On Sep 12, 2016, we issued an updated research report on premium railroads manufacturing firm, LB Foster Co. (FSTR - Free Report) . The company offers a variety of non-imitable products and services to the rail, construction, energy and utility markets through its Rail, Products, Construction and Tubular Product segments. However, the company operates through a wide global network, which exposes it to stiff competition within the industry.
Bearish Factors
Weak infrastructure & maintenance spending, low piling & bridge products, test & inspection services and threaded & coated businesses sales are currently hurting LB Fosters’ revenues. The company also conducts its business in a highly competitive market. In order to lower risks of market share loss and increase competency in the market, LB Foster makes heavy investments toward new technological innovations. However, such expenses often go in vain, if the newly invented technology becomes obsolete.
Further, steel is used as the key raw material for most of LB Foster’s operations. However, its price and availability remain uncertain due to cyclicality of the steel industry. The company is also dependant on a few suppliers for its operations. In case, there is a disruption in adequate or timely supply of raw materials, the company may incur losses. Also, unfavorable changes in spending pattern of the government might delay or permanently defer LB Fosters’ ongoing or future projects. Therefore, availability of capital resources utilized by the company in its projects remains subject to certain uncertainties. Moreover, demand for the company’s products and services are sensitive to changes in customer order timings.
A Few Avenues
Though we remain apprehensive about the negatives weighing on this Zacks Rank #5 (Strong Sell) stock’s results in the near term, we expect certain favorable developments to partially offset such adversities. Bookings and backlog play an important role in determining the revenues of a construction company like Foster. In second-quarter 2016, bookings increased 12.7% year over year for the Construction Products segment. We believe that favorable bookings in the business segments will benefit the company's top line and profitability in the near term. Also, the company’s new Enterprise Resource Planning ('ERP') system is expected to generate benefits in the quarters ahead.
Stocks to Consider
Some better-ranked stocks within the industry include ArcelorMittal (MT - Free Report) , Angang Steel Company Limited and Ternium S.A. (TX - Free Report) . Both Angang Steel Company Limited and Ternium S.A. hold a Zacks Rank #2 (Buy), while ArcelorMittal sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>