Earnings Preview: Foster Wheeler

Foster Wheeler AG (FWLT - Analyst Report) is slated to release its fourth-quarter 2011 results on Thursday, February 23, 2012. The current Zacks Consensus Estimate for fourth-quarter earnings per share (EPS) is 45 cents, representing an annualized growth of 43.6%.  

For 2011, the Zacks Consensus Estimate for earnings per share is $1.47, reflecting an estimated decline of 15.81%.

Foster Wheeler’ earnings were below of the Zacks Consensus Estimate by 11 cents in the last quarter and above estimate by 18 cents in the second quarter of 2011. It had underperformed in the first quarter of 2011 and in the fourth quarter of 2010, with an average negative surprise of 0.07%.

Third Quarter Highlights

Foster Wheeler reported third-quarter 2011 earnings per share from continuing operations of 33 cents compared with 40 cents in the prior-year quarter. The company underperformed the Zacks Consensus Estimate of 44 cents.

Consolidated operating revenue in the quarter was $1.13 billion compared with $904.7 million in the prior-year period.

Global Engineering and Construction (E&C) Group’s operating revenue was $417.8 million compared with $380.6 million in the prior-year period. Global Power Group (GPG) operating revenue decreased to $247.4 million from $249.0 million in the prior-year period as volume of boiler work increased.

Agreement of Estimate Revisions  

In the last 30 days, of the analysts providing estimates on the stock, one analyst decreased its estimates for the fourth quarter and full-year 2011. Three analysts lowered their estimates while one increased the same for full-year 2012. None of the analysts revised their estimate for the first quarter of 2012.

In the last 7 days, none of the analysts changed their estimates for fourth-quarter 2011, full-year 2011, first-quarter 2012 or full-year 2012.

Magnitude of Estimate Revisions  

In the last 30 days and 7 days, the earnings estimates for fourth quarter, full year 2011 and first quarter 2012 remained unchanged.  For full-year 2012, the consensus estimate decreased from $1.90 to $1.86 in the last 30 days and from $1.86 to $1.85 in the last 7 days.

Our Take

Foster Wheeler is witnessing a growing need for capacity additions in a number of developing countries. There is often a preference for solid fuel boilers in these countries. The company’s CFB technology continues to be its preferred solid fuel technology when a client has a hard-to-burn fuel or needs flexibility in fuel type.

In third-quarter 2011, the company has witnessed a recovery in demand for its services and received a number of contracts. The increased activity reflects Foster’s strong position in a wide range of market across both business lines and geographies. Though the company delivered robust operating performance during the third quarter of 2011, its net income and EBITDA declined. This decline resulted from prevailing weak market conditions.

Foster Wheeler AG is based in Zug Switzerland, but its operational headquarters are in Clinton NJ USA. The majority of Foster’s revenues and new businesses originate from outside the United States.  The company serves the following industries: Oil and Gas; Oil Refining; Chemical & Petrochemical; Pharmaceutical; Environmental; Power Generation; and Power Plant Operation and Maintenance. Major competitors of Foster Wheeler are Fluor Corporation (FLR - Analyst Report) and Jacobs Engineering Group Inc. (JEC - Analyst Report).

We continue to maintain a Neutral rating on Foster Wheeler, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

Read the full analyst report on JEC

Read the full analyst report on FWLT

Read the full analyst report on FLR