Premium railroads manufacturing company L. B. Foster Co. (FSTR) recently inked a distribution agreement with the U.K.-based specialized rail technology firm Tracksure for an undisclosed amount. The deal would empower L. B. Foster to sell Tracksure’s unique and innovative fasteners across all marketplaces of North America.
Tracksure Fastening System
Tracksure, a wholly owned secondary business unit of Wheelsure Holdings Limited, is a famous rail technology firm in Bedfordshire, UK. The rail fasteners of Tracksure are manufactured with customized and patented technology. These fasteners help reduce railroad nut loosening, thereby supporting specialized operational benefits for railroad managers and assisting them in providing required safety to customers.
Agreement Impact
L. B. Foster is a popular fabricator, manufacturer and distributor of products utilized in the railway, energy or construction markets. It is a leading friction management solutions provider in the global railway industry. The company’s solutions are used for increasing the efficiency of fuel consumption and lowering the depreciation of freight as well as transit railways. With a high brand value in the market, the company constantly aims to enhance its shareholders’ wealth.
L. B. Foster, after researching and testing Tracksure’s fastening arrangements for an extended tenure, has accepted the deal. By combining the railroad product offerings of Tracksure with its own diversified product base, L.B. Foster aims to deliver higher satisfaction and utility to its clientele. The company has already started utilizing Tracksure’s fasteners in Diamond Crossings, along with numerous Class 1 railroads of North America.
L. B. Foster shares a unique corporate trading relationship with Tracksure for the last two years. The new distribution agreement will ensure greater safety and lower maintenance costs for L.B. Foster. On the other hand, the deal will expand the market for Tracksures’ products, as L. B. Foster would effectively utilize the fastening arrangements of Tracksure in most of its railroad operations.
Insights
In the last reported quarter, L. B. Foster had generated robust operating cash flow of $49.6 million. The company’s solid cash flow came in handy while closing the acquisition of Carr Concrete Products and enhancing its capital expenditure for accruing future growth. A couple of days back, the organization augmented its quarterly dividend by 33% to 4 cents per share after acquiring a Balfour Beatty Rail unit. Maintaining a positive outlook toward the upcoming quarters, L.B. Foster claimed that it missed last-quarter earnings estimates due to high one-time expenses related to acquisition and ERP implementation. The recent investments are expected to generate higher returns in the upcoming quarters.
Considering that the strategic growth initiatives are yet to show results, L. B. Foster currently holds a Zacks Rank #5 (Strong Sell). Some better-ranked stocks worth considering in the industry include Kobe Steel Ltd. (KBSTY), Nucor Corporation (NUE) and United States Steel Corp. (X). While Kobe Steel sports a Zacks Rank #1 (Strong Buy), both Nucor Corporation and States Steel Corp. carry a Zacks Rank #2 (Buy).
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