Foster Wheeler Crafts 52-Week High


On April 2, shares of Foster Wheeler AG (FWLT) scaled a new 52-week high of $33.46 per share. Its proposed acquisition by AMEC plc, initiatives taken to improve its fundamentals and continued contract wins fueled the momentum. The stock returned 46% in the 1–year period, higher than NASDAQ’s return of about 30%.

Foster Wheeler signed a definitive sell-off agreement on Feb 13, with a U.K.-based company, AMEC plc. The stock has been on uptrend since then, gaining more than 30% to date.

Foster Wheeler has been a market leader in mid-stream and downstream oil and gas industry, which provide it a competitive edge. However, the company was witnessing a rising need for capacity additions in a number of developing countries.

This acquisition, while meeting these requirements, will also complement Foster Wheeler’s long-term objective of expansion across diverse sectors including upstream, minerals and metals. Moreover, this acquisition is expected to strengthen the company’s presence in the Middle East. AMEC’s capacities in upstream exploration will perfectly complement Foster Wheeler and help to drive both the top and bottom lines.

The aforementioned deal helped the company to win a string of contracts over the past two months. Notably, on March 25, Foster Wheeler had signed a five-year alliance agreement with OMV for providing diverse services at its refineries in Germany and Austria. Prior to that, in February, the company had received a couple of separate contacts from Statoil Petroleum AS, subsidiary of Statoil ASA (STO) and a subsidiary of Maire Tecnimont S.p.A., Tecnimont USA Inc.

Moreover, Foster Wheeler is focused on strengthening its business and gaining market share through strategic acquisitions to broaden its existing portfolio. As part of its endeavors, on March 13, the company announced that it would be taking over South Africa-based mining company, MDM Engineering Group Ltd. for approximately $109 million. Subsequently, on March 20, the company again declared its decision to acquire Siemens Environmental Systems and Services business from Siemens Energy, Inc. for an undisclosed amount.

For 2014, the Zacks Consensus Estimate for this stock is currently pegged at $1.88 per share, which reflects impressive year-over-year growth of 50.31%. For 2015, the Zacks Consensus Estimate is $2.25 per share, marking a year-over-year rise of 19.88%.

Foster Wheeler’s solid fundamentals continue to aid growth while keeping up its credibility to earn more deals even after it signed a definitive sell-off agreement with a rival company. The expected long-term earnings growth rate for the stock is 12%.

At present, Foster Wheeler has a Zacks Rank #3 (Hold). However, some better-ranked players in the engineering and heavy industry worth a look include AECOM Technology Corp. (ACM) and Quanta Services, Inc. (PWR). Both of these carry a Zacks Rank #2 (Buy).

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