Best Growth Already Been Seen at Foster Wheeler? (FWLT)

Foster Wheeler is seeing shares hit hard this morning.  Its earnings rose roughly 24% to $0.54 EPS and revenues were $1.47 Billion.  The problem is that First Call estimates were $0.76 EPS on $1.42 Billion in revenues.  Part of the earnings discrepancy was an $8 million tariff and a $5 million client reserve reimbursement.  It also “experienced fewer profit-enhancing opportunities.”  The company said it ended the year with record scope backlog.

Raymond Milchovich, CEO comments on an outlook: “…..we expect meaningful organic growth and sustainable margins. We’re hopeful that this can be complemented by growth through strategic acquisitions during the year as well. In our Global Power Group, as we’ve previously stated, we remain confident that we will enjoy a material level of margin improvement and revenue growth during the year given our position and momentum entering 2008.”

Shares of Foster Wheeler are down almost 10% pre-market at $71.45.  The 52-week trading range is $26.69 to $85.65.  So shares are still up close to 200% with this haircut from year lows.  The shares are also up tenfold from the end of 2004.

With what was an $11.3 Billion market cap as of yesterday, it sure looks like Wall Street is going to be a little more selective on how it rates the growth ahead in infrastructure engineering and construction giant.  The growth is not over and it probably won’t get penalized for small acquisitions it can easily and cheaply integrate here and there.  But the exponential organic growth looks like it may have started running into limitations with the law of large numbers.

Jon C. Ogg
February 26, 2008