FWLT's Prospects Remain Robust

For Kahn's preview heading into the Foster Wheeler conference call, please click here.

Foster Wheeler (FWLT - commentary - Cramer's Take) reported a pretty solid quarter, all things considered. The headline read that the company missed consensus estimates by 2 cents, if you go by First Call estimates. But Reuters had the consensus at 89 cents, right where the company came in, so I would call the results in line.

The highlights of the call were that the engineering and construction group continued to show strong operating performance. This group accounts for roughly 75% of the mix. New orders booked rose 24% vs. the average quarter in 2007. The number of man-hours in backlog rose to an all-time record. Earnings before interest, taxes, depreciation and amortization (EBITDA) margins were 19.3%, below the average of 2007, but there were three one-time events that depressed results for the quarter.

Importantly, management said that it is seeing no material cancellations of contracts in backlog due to turbulence in the financial markets or concerns over the trend in commodity prices. The CEO said that the company's prospect list remains robust, and that it's currently pursuing eight "mega" projects, which would require increased capacity if booked. He also said that management remains bullish for the next two quarters for this group.

The results for the Global Power Group (GPG) were less strong, but we have heard about weakness in this group for a while now, so it didn't come as a big surprise. New orders booked rose from last quarter, but were still roughly 13% lower than the average from 2007. EBITDA margins came in at 15.1%, also down from 2007.

For GPG, management also said that it is seeing no material cancelations but that the company has seen ongoing delays in North America and sporadic "schedule slippage" in some European projects. Management went on to say that market conditions will likely continue to challenge GPG in 2009.

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At the 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.