Foster Wheeler may have tumbled 24% from its recent high of $32, but that stock price doesn’t represent what Cramer sees as a good near-term future for this company.
In the most recent quarter, the company’s book-to-bill ratio came in at 1.5, meaning it has many more orders than it can deliver. Its power business was up big with $460 million in scope bookings compared to just $93 million a year ago. And the backlog registered at $2.3 billion, which is huge when you consider that this is only a $3 billion company.
Admittedly, Foster Wheeler missed analysts’ estimates by 10 cents when it reported, which, along with falling crude prices, is responsible for that 24% hair cut. But again, Cramer is looking forward, not back. He said engineering and construction activity is picking up and a number of new contracts should be awarded in the second half of the year. And FWLT is in a better position than most to win these contracts, too, because it’s been so disciplined in its bidding up until now. Other firms have been overly aggressive, leaving them with little to no budget for new work.
Another important point: On June 1, Foster-Wheeler’s current CEO, Ray Milchovich, the boss since 2001, will step down. Replacing him will be the present head of the company’s US division, Bob Flexon. Cramer credits Milchovich will bringing his firm back from the brink, turning it into the highest-margin engineering and construction player in the business in just eight years.
To find out what’s next for Foster Wheeler, Cramer invited Milchovich to the show. Watch the video for the full interview.
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