We issued an updated research report on the premium business service company, LB Foster Co. FSTR on Mar 10, 2015. The company is a leading friction management solutions provider in the global railway industry. Its 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 status, the company remains committed toward enhancing its shareholders’ value. However, LB Foster remains exposed to certain internal and external headwinds in its trade.
Scopes for Improvement
L.B. Foster posted impressive fourth-quarter results for 2014. The company’s adjusted earnings and revenues surpassed the respective year-ago tallies by 19.7% and 3%. The improvement was mainly attributable to increased sales in the company’s Tubular and Rail segments. We believe the company’s aggregate sales would improve in the coming quarters, provided a favorable business environment continues.
Moreover, in fourth-quarter 2014, L.B. Foster generated record cash from operating activities. The solid improvement came on the back of superior management of working capital. The company also expects to generate an increased amount of cash from its operating activities in 2015, which will exceed the expenses associated with capital expenditure, dividends, debt service payments and share repurchases. At the same time, the firm intends to improve its business on the back of strategic inorganic growth plans.
Problems to Consider
In fourth-quarter 2014, L.B. Foster’s Construction revenues decreased 3.5% year over year. 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. Such softness in business can negatively affect the company’s aggregate revenues in the upcoming earnings session. Further, the company faces risks pertaining to severe market rivalry as well as external headwinds.
With a market capitalization of $447.03 million, LB Foster currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Kobe Steel Ltd. KBSTY, ThyssenKrupp AG TYEKF and The ADT Corporation ADT. While both Kobe Steel Ltd. and ThyssenKrupp AG sport a Zacks Rank #1 (Strong Buy), The ADT Corporation carries a Zacks Rank #2 (Buy).
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