Foster Wheeler AG (FWLT) reported fourth-quarter 2010 earnings per share from continuing operations of 31 cents compared with 67 cents in the prior-year quarter. The company underperformed the Zacks Consensus Estimate of 47 cents.
Excluding asbestos related provision of 5 cents, earnings per share in the quarter was 26 cents compared with 51 cents (after asbestos related provision of 16 cents). Lower volumes and margins in the Global Engineering and Construction Group and a higher effective tax rate in comparison to 2009 negatively affected net income in the quarter.
For 2010, earnings per share from continuing operations were $1.74 compared with $2.96 in 2009. The company underperformed the Zacks Consensus Estimate of $1.92.
Total Revenue
Consolidated operating revenue in the quarter was $1.21 billion compared with $1.27 billion in the prior-year period. For 2010, consolidated revenue was $4.07 billion compared with $5.06 billion in 2009.
Segment Result
Global Engineering and Construction (E&C) Group operating revenue was $419 million compared with $489 million in the prior-year period. Backlog for the segment almost doubled in the quarter on a year-over-year basis, with new order increasing to $562 million compared with $395 million in the prior-year period.
Global Power Group (GPG) operating revenue was $234 million compared with $216 million in the prior-year period. New order in the segment increased to $420 million compared with $214 million in the prior-year period.
Income & Expenses
Contract profit in the quarter was $138.9 million compared with $182.1 million in the prior-year quarter. SG&A expense was $89.9 million compared with $80.8 million. Consolidated EBITDA in the quarter was $71 million compared with $90 million while adjusted consolidated EBITDA was $77 million compared with $91 million.
E&C EBTDA was $42 million in the quarter compared with $74 million in the prior-year quarter and GPG EBITDA was $67 million compared with $41 million.
Balance Sheet
Cash and cash equivalents at the end of 2010 was $1.06 billion compared with $997.2 million at the end of 2009. Long-term debt was $152.6 million compared with $175.5 million and shareholders’ equity was $967.7 million compared with $831.5 million.
The company did not repurchase any shares in the fourth quarter of 2010. Foster Wheeler has a total authorization of approximately $500 million available for share repurchase.
Outlook
The company expects Global E&C Group scope revenue in 2011 to exceed 2010 revenue. For 2011, the segment EBITDA margin is expected to be in the range of 13%–15%. As a result of competitive pressure in 2011, margin is expected to be lower than that of 2010.
Global Power Group scope revenue is expected to be up sharply in 2011 versus 2010, supported by increased number of boiler orders won over the past 12 to 18 months. The segment EBITDA margin on scope revenue in 2011 is expected in the range of 14%–16%.
Foster Wheeler AG is based in Zug Switzerland, but its operational headquarters are in Clinton NJ USA. The majority of Foster’s revenues and new businesses originate from outside the United States. The company serves the following industries: Oil and Gas; Oil Refining; Chemical & Petrochemical; Pharmaceutical; Environmental; Power Generation; and Power Plant Operation and Maintenance. Major competitors of Foster Wheeler are Fluor Corporation (FLR) and Jacobs Engineering Group Inc. (JEC).
We continue to maintain a Neutral rating on Foster Wheeler, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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