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Balanced View on L. B. Foster

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We issued an updated research report on L. B. Foster Company on Jun 10, 2014. The company has been attempting to gain a higher market share by launching products in the near term. L.B. Foster plans to spend roughly $18−$22 million in 2014 for product launches, expansion into new markets and improvement of its cost position.

The company has strong inorganic growth potential as well. It acquired Ball Winch Pipeline Services in Nov 2013, which will yield significant financial contribution in the quarters to come. The Ball Winch integration will enable the company to flourish in Houston, TX and is expected to generate annual revenues of $15 million in 2014. This will, in turn, increase the tubular segment revenues.

However, L.B. Foster faces stiff rivalry from other market players for most of its products. To survive in a highly competitive market, the company has to put in a lot of effort in order to remain updated and in sync with the current technologies. This entails a considerably large expenditure on research and development.

Moreover, L.B. Foster’s main raw material, steel, is exposed to price fluctuations and availability. In case there is a disruption in adequate or timely supply of raw materials, Foster may incur losses.

The company recorded lower-than-expected earnings and revenues for the first quarter of 2014. While earnings dropped 27% year over year to 48 cents per share, revenues fell 14% year over year to $111 million. However, Foster recorded a backlog of $353.3 million in first-quarter 2014, increasing 2.1% year over year and 38.3% sequentially.   

With a market capitalization of $550.3 million, L.B. Foster carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Universal Stainless & Alloy Products Inc. (USAP - Free Report) , ThyssenKrupp AG and Gibraltar Industries, Inc. (ROCK - Free Report) . While Universal Stainless & Alloy Products sports a Zacks Rank #1 (Strong Buy), both ThyssenKrupp and Gibraltar Industries hold a Zacks Rank #2 (Buy).

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