Foster Wheeler AG (FWLT) reported first-quarter 2011 earnings per share from continuing operations of 18 cents compared with 56 cents in the prior-year quarter. The company underperformed the Zacks Consensus Estimate of 42 cents.
Excluding asbestos related provision of 1 cent, earnings per share in the quarter came in at 19 cents compared with 56 cents (no asbestos related provision). Net income in the quarter declined due to lower realized EBITDA margins in Global Engineering and Construction (E&C) Group as well as Global Power Group (GPG), lower volumes in Global E&C Group and fewer opportunities to increase profit in both groups.
Total Revenue
Consolidated operating revenue in the quarter was $1.04 billion compared with $945.6 million in the prior-year period.
Segment Result
Global Engineering and Construction (E&C) Group operating revenue was $359 million compared with $414 million in the prior-year period. The decreased revenue was due to lower volume of work executed. New orders declined to $381 million from $418 million due to excessive time taken by clients to decide awards of certain contracts.
Global Power Group (GPG) operating revenue was $210 million compared with $163 million in the prior-year period. New order in the segment decreased to $141 million compared with $460 million in the prior-year period, led by delays in the timing of expected large boiler contracts.
Income & Expenses
Contract profit in the quarter was $99.3 million compared with $172.1 million in the prior-year quarter. SG&A expense was $73.8 million compared with $70.3 million.
E&C EBTDA was $42 million in the quarter compared with $100 million in the prior-year quarter and GPG EBITDA was $26 million compared with $30 million in the year-ago comparable period.
Balance Sheet
Cash and cash equivalents at the end of the quarter was $1.10 billion compared with $1.06 million at the end of the prior-year quarter. Long-term debt was $158.1 million compared with $152.6 million in the year-ago quarter and shareholders’ equity was $1.04 billion compared with $1.02 billion in the prior-year period.
During the first quarter of 2011, the company repurchased 859,904 shares for approximately $29 million. In April 2011, the company purchased an additional 312,200 shares for approximately $10.8 million. As of April 29, 2011, Foster Wheeler had $461 million remaining under its authorized share repurchase program.
Outlook
The company expects Global E&C Group scope revenue and backlog in 2011 to exceed 2010 level. For 2011, the segment EBITDA margin is expected to be in the range of 13%–15%.
Global Power Group scope revenue is expected to be up sharply in 2011 versus 2010. The segment EBITDA margin on scope revenue in 2011 is expected to be in the range of 14%–16%.
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) and Jacobs Engineering Group Inc. (JEC).
We continue to maintain a Neutral rating on Foster Wheeler, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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FOSTER WHELR AG (FWLT): Free Stock Analysis Report
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