Foster Wheeler: An Easy Candidate for $200 and Beyond

Nov.13.07 | About: Amec Foster (AMFW)

Looks like more bullish news from one of my favorites, Foster Wheeler (FWLT) - this stock held up incredibly well last week; its stock was weak ahead of earnings but it had one of the best reports of the quarter (and probably the best outside of the fertilizer stocks) and looks like an easy candidate for $200+ in the months ahead.

In fact in a calm market I think this stock would be north of $180 right now. It is still one of the cheaper valuation plays in the infrastructure sector... and remember as I continue to say, go where the money is - countries with hordes of cash made from petrodollars and countries with hordes of cash from trade surpluses. Foster Wheeler covers both.

Citigroup seems to agree with me

Foster Wheeler
, which engages in large-scale construction projects like oil pipelines and natural gas plants, shot up as much as 8.2% Thursday after Citigroup raised its ratings on the stock to buy from hold. The stock move follows a similar rise on Wednesday, the same day Foster Wheeler reported third-quarter net income jumped 70% and declared a 2-for-1 stock split. Citigroup analyst Brian Chin also increased his target price to $197 from $180.50 a share on strong third-quarter results "bolstered by potential Middle Eastern project wins." Chin said Foster Wheeler stands a good chance of benefiting from Saudi Aramco's recently announced five-year, $90 billion energy infrastructure program

From Mad Money

Cramer welcomed Ray Milchovich, CEO of Foster Wheeler (FWLT), a "Mad Money" favorite. Cramer noted that the stock had performed exceptionally, but lately there had been speculation that Foster Wheeler's market had been saturated. "Is there any more ahead?" he asked Milchovich. "Every time we released a quarter, the markets that support these businesses continue to be extremely strong," Milchovich replied. He added that "Saudi Aramco ... just announced their intent to spend ninety billion on oil projects," so there are healthy prospects for the company. Milchovich recognized the need for Foster Wheeler to show leadership in the clean-energy domain. He said the company is working on carbon-capture technology to help develop clean coal power and has made a $30 million equity investment in wind farms in Italy. Asked about the company's balance sheet, Milchovich said that Foster Wheeler's leverage ratios are competitive with others in the industry.

Cramer asked about Foster Wheeler's global reach. Milchovich said that "75% to 80% of our business is outside of North America. ... We are truly a global company." With strong performance in the Asia-Pacific region, the company is not exclusively dependent on the Middle East.

Disclosure: Long Foster Wheeler in fund; no personal position