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   Non-TechFoster Wheeler (FWC) beaten down but why

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To: wolfgangl who wrote ()8/6/1998 8:48:00 AM
From: Paul Getman
   of 24
 
I am not an expert on FWC. However, like you, I can't find any good reason why FWC's stock price is plunging. The book value is around $17 and the dividend yield is now over 5%. FWC's fortunes are partially tied to Asia and to oil prices, neither of which are favorable, but that impact should have been fully discounted in the drop from the high 40's to the low 20's. Value Line and Merrill Lynch rate FWC a hold, but UBS still rates it a strong buy.

Incidentally, the company released a press release several weeks back in which it said that it couldn't account for the plunge in its stock price!

Paul

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To: Paul Getman who wrote (1)8/8/1998 6:56:00 PM
From: Evan
   of 24
 
Foster WHEELER is one of a group of companies
such as FLR,JEC,SW etc who are chasing a tight
petrochem market.None of these companies have
done well for over three years.Clients have moved
to lump sum turn key bidding which leaves very
little profit at the end and plenty of risk.
Foreign competition also have different ideas
about profits than than US public companies.
No turnaround on the horizon.

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To: Paul Getman who wrote (1)8/9/1998 3:45:00 AM
From: wolfgangl
   of 24
 
Paul,

I would like to know the sources of your insight as book value and this press release, that they could not account for the plunge.
Technically it seems way oversold now. But I buy only procyclic.
We should watch it closely.

Thanks a lot for your most interesting response,

Wolfgang

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To: Evan who wrote (2)8/9/1998 3:53:00 AM
From: wolfgangl
   of 24
 
Evan,

I judge my understanding of US English language quite good, but what does mean "lump sum turn key bidding"?
Would you please elaborate a bit more on why there is no turnaround in the near future? I regard this stock technically way oversold now.

Your eager student,

Wolfgang Lauer

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To: wolfgangl who wrote (4)8/9/1998 4:03:00 PM
From: Evan
   of 24
 
Wolfgang. Lump Sum Turnkey Bidding is the
common method for oil and chemical companies
to complete projects.The contractors bid
against each other for a fixed price to
design,procure and construct a plant.Cost
overuns,which are common,are a loss for the
contractor.FW is no better at it than the
others.Most of the projects are located in
Asia,Middle East or Africa.Best analysis of
these companies is profit versus billings.
Most make less than 5%.The premium company
is Fluor which sells for 57% off its high.
A turn around for most of these companies
would occur if the price of oil goes over
$20 a barrel.
FW is about a fifth of the size of FLR and
I dont see it getting any bigger.

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To: Evan who wrote (5)8/10/1998 6:51:00 PM
From: Paul Getman
   of 24
 
My source for FWC's book value is Value Line, which publishes several updates each year on FWC (and the other companies it follows). Although Value Line wasn't recommending the stock at the time, in its last report it did say that FWC, over time, offered exceptional value--and that was when the stock was $27.

FWC's press releases can be found on the company's web site, fwc.com; look for the press release titled:
FOSTER WHEELER CORPORATION SAYS 2ND QUARTER EARNINGS ARE EXPECTED TO BE IN LINE WITH STREET EXPECTATIONS

I appreciate the comments about the very poor industry conditions facing the E&C companies right now, particularly with Asian deep in the hole and oil prices at very low levels. But that doesn't explain (to my satisfaction) why FWC has suffered so much relative to Fluor, which also has a huge exposure to Asian and to the energy market.

Paul

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To: Paul Getman who wrote (6)8/10/1998 10:09:00 PM
From: Evan
   of 24
 
Paul.I dont know the specifics of the recent
drop other than the industry trend.I wonder
if it could relate to the large percentage of
their work being done at FWC France and how
this will relate to the company bottom line.
It would be interesting to know who dumped.

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To: Evan who wrote (5)8/11/1998 2:32:00 AM
From: wolfgangl
   of 24
 
Evan and Paul,

thanks for your posts. The only additional point that I can think of in order to explain current low valuation is institutional percentage held, which is 82% for FWC. This is very high. I observe similar constellation with other tanking issues like Brunswick and Parker Hannifin. Both have reasonable fundamentals, high institutional percentage held but are not in the oil service sector. Are institutions generally discharging stocks?

Wolfgang

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To: wolfgangl who wrote (8)8/11/1998 9:23:00 PM
From: Evan
   of 24
 
Wolfgang. It could be some institutional investors
repositioned themselves and caused the drop in price.
It may have created an undervalued stock in a poor
market sector.If the overall market declines then
this sector will also decline.

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To: Evan who wrote (9)9/15/1998 11:16:00 AM
From: Evan
   of 24
 
May be time for a wake up call for FWC.The engineering
and construction group have been dogs for two years
and FWC was beaten down the most in the major players,
with due cause.A turn around seems to be imminent and
several insiders have bought in the past year at twice the current
price.

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