Foster Wheeler AG (FWLT) lagged some of its peers in backlog growth due to its primary exposure to the downstream side of the petrochemical chain rather than the upstream, but Robert F. Norfleet, Managing Director and Senior Equity Research Analyst at BB&T Capital Markets, says this exposure may result in opportunities going forward.
“The reason we like the company is because if you look at their end markets both in petrochemical and international refinery, we think that there’s significant opportunities for the company to book very meaningful work, and we have seen them do this over the last two quarters. In addition, we think they are going to increase their exposure into the upstream oil and gas market,” Norfleet said.
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Norfleet says Foster Wheeler recently was awarded a contract to build a refinery in Venezuela, and the company may expect to participate in North American natural gas and oil construction.
“We also expect that they are going to participate in the North American LNG and petrochemical buildout, but unlike some of the other companies I follow, they are not yet seeing accelerating earnings and better margins. We believe Foster’s going to actually have a flat to down year in 2013 before showing what we think will be a nice lift in 2014, so it is just more of a later cycle way of playing this investment thesis,” Norfleet said.
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