Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the Construction & Engineering industry average, but is less than that of the S&P 500. The net income increased by 31.0% when compared to the same quarter one year prior, rising from $13.03 million to $17.07 million.
- FWLT's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 52.81% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- FOSTER WHEELER AG has improved earnings per share by 6.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FOSTER WHEELER AG reported lower earnings of $0.96 versus $1.40 in the prior year. This year, the market expects an improvement in earnings ($1.81 versus $0.96).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.1%. Since the same quarter one year prior, revenues slightly dropped by 7.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
Foster Wheeler AG, through its subsidiaries, operates in engineering and construction, as well as power generating equipment businesses worldwide. Foster Wheeler has a market cap of $3.27 billion and is part of the industrial goods sector and materials & construction industry. Shares are down 0.5% year to date as of the close of trading on Tuesday.
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