L.B. Foster Company FSTR reported impressive fourth-quarter operating results for 2014. The company’s adjusted EPS from continuing operations, excluding certain charges, came in at 85 cents per share, up 19.7% year over year.
The bottom line also surpassed the Zacks Consensus Estimate of 69 cents. The improvement was primarily driven by increased profitability from the company’s Construction and Rail segments.
For full-year 2014, the company’s adjusted EPS from continuing operations, excluding certain charges, were $3.02 compared with $2.85 as of Dec 31 2013. Improvement of 6% was backed by the company’s successful organic growth initiatives. LB Foster also benefited from the acquisition of Chemtec Energy Services and TEW Engineering in the U.K.
Revenues
Net sales for the fourth quarter were $161.1 million, climbing 3% year over year, primarily due to a hike in market demand for the company’s Tubular segments products. The top line even exceeded the Zacks Consensus Estimate of $155.0 million.
Revenues from the Rail Products segment were up 6.6% year over year to $91.5 million. Improved Rail Technologies, Concrete Tie, Allegheny Rail Products and Rail Distribution trade supported the rise in revenues.
The Construction Products segment revenues slipped 3.5% year over year to $59.7 million. Though partially offset by better performance of Bridge and concrete products, the segment’s top line suffered a year-over-year decline due to poor sales in the Piling division.
The Tubular Products segment generated revenues of $9.9 million, up 13.3% year over year. Growth was attributable to favorable impact from the acquisition in the Coated Products segment.
For full-year 2014, LB Foster’s revenues totaled $607.2 million versus $598.0 million generated in 2013.
The year-over-year improvement in the company’s quarterly and annual revenues was primarily driven by growth in Rail and Tubular segment sales.
Costs/Margins
Adjusted gross profit margin in the quarter stood at 19.6%, in line with the year-ago tally. Selling and administrative expenses totaled $21.5 million, up from $18.6 million in the year-ago quarter, owing to a rise in acquisition and personnel expenses.
The Rail Products segment recorded gross profit margin of 20.7%, contracting 130 basis points (bps) year over year, due to imposition of $4.8 million of warranty charge on its business.
Construction Products segment’s gross profit margin improved 160 bps from the prior-year quarter to 17.7%, as a result of favorable product mix as well as improvement in Bridge and Piling trade.
Gross profit margin of the Tubular Products segment was 20.1%, plummeting 540 bps year over year, owing to lower coated product margins. The reduced margins were caused by shutdown of the company’s Birmingham, AL-based coating facility in Dec 2014.
Gross profit margin for full-year 2014 stood at 20% compared with 19.4% in 2013. Annual margins improved year over year primarily due to increased profitability from Rail and Construction divisions.
Balance Sheet/Cash Flow
Exiting fourth-quarter 2014, L.B. Foster’s cash and cash equivalents were approximately $52.0 million compared with $64.6 million at year-end 2013. Total long-term debt stood at $25.8 million versus $25.0 million as on Dec 31, 2013.
In 2014, L.B. Foster generated a record cash from operating activities of $66.6 million versus $13.9 million generated in the year-ago comparable period. The remarkable improvement came on the back of superior management of working capital on the company’s part. Capital expenditure rose to $17.1 million from $9.7 million in 2013.
Outlook
Maintaining a positive outlook toward the market, management expects a favorable business environment for all segments in 2015. LB Foster aims to upgrade its business systems in the upcoming year. The company also intends to garner maximum benefits from its acquisitions, so as to reach its growth target.
Other Stocks to Consider
With a market capitalization of $491.57 million, LB Foster currently holds a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include Kobe Steel Ltd. KBSTY, ThyssenKrupp AG TYEKF and The ADT Corp. ADT. All three stocks sport a Zacks Rank #1 (Strong Buy).
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