What's Wrong With Foster Wheeler?
Foster Wheeler started its day off right. A solid earnings report pushed the stock up a quick $3. But then management held its conference call. Question after question came about the one soft patch in the company’s business – North American solid fuels in the power division – until the negative sentiment forced Foster to give back its gains.
The call left management – and Cramer – scratching their heads. The mere mention that “one segment of the market showed some project delays,” CEO Ray Milchovich said during Wednesday's Mad Money, and Foster Wheeler took at hit. Even despite the fact that the power division as a whole had an “all-time record earnings quarter.”
“We try to give complete and thorough disclosure to the people in the public,” Milchovich said of his straight talk on the call. “We think that’s our obligation.”
Those delays Milchovich was talking about come with the territory when you’re dealing with carbon-based fuels, he said. There are always environmental concerns, and given the mess in the U.S. credit markets for the past three quarters, there have been some financial concerns as well. But they're just temporary.
“We believe that this is simply a moderation,” Milchovich said, “not a sea change or a cycle in the market.”
“We still haven’t conceded that we’re going to build backlog in that business in 2008,” he continued, “and that we’re going to see growth in 2009.”
As for the rest of Foster-Wheeler, things look good. The liquefied natural gas, refining, chemicals and petrochemicals markets that make up the company’s engineering and construction business, which accounts for 70% of FWLT, “have been and continue to be extremely robust,” Milchovich said. “The opportunity in the marketplace exceeds that which we and our competitors can serve.”
“The analysts were acting as if [Foster Wheeler] was just going to fall apart,” Cramer said. “It isn’t.” He’s sticking with Foster Wheeler.
Jim’s charitable trust owns Foster Wheeler.
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