On Sep 5, 2014, we issued an updated research report on Foster Wheeler AG (FWLT). The announcement of its acquisition by AMEC reinforces the company’s long-term objective of expansion across diverse sectors, including upstream, minerals and metals.
Foster Wheeler signed a definitive sell-off agreement with U.K.-based AMEC plc, on Feb 13. A market leader in mid-stream and down-stream oil and gas industry, Foster Wheeler, was however, witnessing a growing need for capacity additions in a number of developing countries. AMEC’s strong foothold in upstream exploration, which when integrated with Foster Wheeler’s capabilities, is expected to significantly boost its production capacity as well as enhance the efficiency of the vertical supply-chain.
Further, Foster Wheeler has been receiving a number of contracts for front-end engineering work and subsequently, for engineering, procurement and construction phase. With a rise in the global electrical energy demand, leading to increased investments in the development of advanced technology for generating energy; the trend is likely to continue. The company has also been acquiring smaller firms to strengthen its business and gain market share, along with enriching its product portfolio.
However, several market constraints such as short-term sluggishness in the power generation segment, changing environmental regulations in Europe and low natural gas prices, may act as impediments to growth.
Stocks That Warrant a Look
At present, Foster Wheeler has a Zacks Rank #3 (Hold). Some better-ranked players in the same sector that are worth a look include Willdan Group Inc. (WLDN), AO Smith Corp (AOS) and VESC Corp. (VSEC). All these stocks carry a Zacks Rank #2 (Buy).
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