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Non-Tech : Foster Wheeler (FWC) beaten down but why

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To: wolfgangl who wrote (19)3/23/1999 9:12:00 AM
From: D. K. G.  Read Replies (2) of 24

Tuesday Morning Conference Call
Foster Wheeler is selling at a 52-week low, and its valuations are too cheap to ignore.

Foster Wheeler has a market capitalization of $488 million. Over the last twelve months, the company has generated sales of $4.6 billion. That gives the company a price-to-sales ratio of 0.11.

Foster Wheeler is over 100 years old. It was created in 1891 to build condensers and pumps for the newly-invented steam turbine engine. Today, Foster Wheeler is based in Clinton, New Jersey and the company is organized into three business groups: the Engineering and Construction unit builds chemical, petroleum, and resource recovery plants; the Energy Equipment unit makes steam generating equipment; and the Power Systems unit operates cogeneration and independent power plants.

There is an insatiable demand for power in foreign countries, which has led CEO Richard Swift to make acquisitions to extend the company's global presence, particularly in developing countries. Currently, more than two-thirds of the company's revenues come from overseas.

Foster Wheeler has a subsidiary in Chile and is involved in manufacturing joint venture in China. The company has contracts in Finland, Turkey, Portugal, Taiwan and Mexico.

Foster Wheeler's stock has been punished down to $12.50, falling from a high of $47 set back in late 1997. The reason for the decline is lack of earnings. The company has lost $42 million over the last two years, owing to losses at its Robbins Resource Recovery unit, the restructure of its European operations and an exorbitant increase in taxes. But Richard Swift thinks all the charges, restructuring and tax penalties are behind the company, and it is poised to once again bring black ink to the bottom line.

Foster Wheeler has a backlog of $7.2 billion, which is about a year and a half worth of work. The company should book about $5.4 billion in revenue in 1999, and if Mr. Swift can reduce the company's debt level, which currently stands at about $850 million, it could make $1.70 per share this year. At $12.50, that gives the company a price-earnings ratio of 7.4.

Foster Wheeler is a fallen angel. It has reported losses for two straight years, leveraged itself to the hilt and mismanaged some foreign operations. And investors have fled the stock, leaving it battered and bruised. That's the best time to buy. When everybody else is saying sayonara, savvy investors are saying opportunity. Foster Wheeler is a strong company that will right itself. The paltry valuations make the stock too cheap to ignore.


Hello Wolfgang, thought you might find this interesting. Please read the website's diclaimer, the report offered gives a nice synopsis but you need to discount their motives. They've made some good calls (DDDDF) in the past, so they are not out to pump and dump stocks.

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