L.B. Foster's (FSTR) Q4 Earnings & Revenues Improve Y/Y

Premium railroads service provider L.B. Foster Company (NASDAQ:FSTR) reported improved fourth-quarter 2017 results.

Earnings and Revenues

Quarterly adjusted earnings came in at 3 cents per share, as against the loss of $3.97 per share reported in the year-ago period.

For 2017, adjusted earnings came in at 39 cents per share, as against the loss of $13.79 reported at the end of 2016.

Net sales in the reported quarter were $141.3 million, up 32.6% year over year. Total sales of goods were $113.4 million, up 27.3% year over year. Also, aggregate sales of services jumped 59.8% to $27.9 million. This upside was backed by improved segmental results.

For full-year 2017, net sales climbed 10.9% year over year to $536.4 million.

Other Financial Fundamentals

Total cost of sales in the reported quarter came in at $113.4 million, as against $87.8 million recorded in the comparable period last year. Gross profit margin in the fourth quarter was 19.7%, up 210 basis points (bps) year over year.

Selling, general and administrative expenses were $20.5 million, as against $20 million incurred in the prior-year quarter. Operating margin in the reported quarter was 17.3%, contracting 430 bps year over year.

For 2017, gross profit margin came in at 19.2%, expanding 50 bps year over year. Operating margin for the year was 17.8%, as against 49.1% recorded in 2016.

Exiting the fourth quarter, L.B. Foster had cash and cash equivalents of $37.7 million, up from $30.4 million recorded at the end of the prior year. Long-term debt was $129.3 million, significantly down from $149.2 million recorded as of Dec 31, 2016.

During the reported quarter, the company generated $11.9 million cash from operating activities, higher than $6.5 million recorded in the year-earlier period.

Outlook

We believe the company’s ongoing modernization programs and lean projects will boost L.B. Foster’s near-term profitability. The company is also focused at lowering its debt burden and strengthening balance sheet over the long run. Also, elevated sales of the recently-launched solutions and products will likely boost the company’s revenues and profitability in the near term.

However, it should also be noted that L.B. Foster conducts its business in a highly competitive industry. Companies like Angang Steel Co. (OTC:ANGGY) , Olympic Steel, Inc. (NASDAQ:ZEUS) and Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) are some major peer companies in this space. The company might lose market share due to competitive pressures. Moreover, other headwinds such as sudden input price inflation or a supply change challenge remain causes of concern.

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