FWLT Preview: Favorable Lumpiness?

Foster Wheeler (FWLT - commentary - Cramer's Take) is set to report earnings before the market opens tomorrow. Consensus estimates are for EPS of 73 cents on revenue of $1.48 billion. The company's earnings stream is often lumpy, which means that it usually doesn't report in line but rather either beats or misses by quite a bit.

Last quarter, the lumpiness worked against the Foster Wheeler, and it missed consensus estimates by 20 cents. There were a number of one-time factors -- such as the repeal of an Italian power tariff, a $5 million reserve taken and a lack of bonus and incentive payments -- that weighed on earnings, which are unlikely to be repeated. So I am hopeful that the lumpiness will work in the company's favor this quarter.

Management gave solid guidance last quarter and said that there is still a "tremendous amount" of engineering and construction work still available worldwide. I fully expect Foster Wheeler to win its share. Management also said that EBITDA margins should be sustainable, and that the Global Power Group should see a "material" increase in revenue and margins. Overall, they remain positive and upbeat about business.

Foster Wheeler is very well positioned in all of the energy and infrastructure projects that need to be completed to bring any material addition to the supply of energy. The recent high prices in oil only underscore how desperate we are for new supply. And once these projects start, they will surely finish. After all, a half-complete liquid natural gas project doesn't bring any new supply to market.

Overall, the stock looks fairly valued at current levels. I added to my positions when the stock was in the mid-$50s but recently lightened up a tad. I am holding my core position, as the stock should still grow at a steady pace and should be bought on any dips.

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At time of publication, Kahn was long Foster Wheeler.

Jordan Kahn, CFA, is a portfolio manager with Bevery Investment Advisors, a Beverly Hills, Calif., money manager. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Kahn appreciates your feedback; click here to send him an email.