Shares of Foster Wheeler moved higher Thursday in a down market on a major new contract with Petrobras (NYSE:PBR) to build a gas-to-liquids facility in Brazil. The company also announced earlier in the week that it is opening a new office in the U.K. due to the strong demand in the upstream business there.
I think these aspects of energy infrastructure (60% of overall company revenues) are going to be strong over the next few years as companies like Cheniere Energy (NYSEMKT:LNG) get financing in place from sources like Blackstone (NYSE:BX) and Asian wealth funds to build multi-billion dollar plants to turn natural gas into liquid. I believe the stock is in the early innings of a significant move up.
6 additional reasons FWLT is a solid value pick up at $21 a share:
- The company has over $600mm in net cash on its balance sheet (more than 25% of market capitalization).
- The 15 analysts that cover the stock have a median price target of $27 a share on FWLT, some 30% above its current stock price.
- The stock is selling near the bottom of its five year valuation range based on P/S, P/CF and P/B.
- Even before this latest contract win, analysts expected the company to bounce back with double digit revenue growth in FY2013. The stock has a tiny five year projected PEG (.52) as well.
- FWLT is selling at just over 10 times forward earnings (under 8 backing out net cash), a discount to its five year average (13.5).
- The stock has bounced off long term technical support and just busted through its 200 day moving average today. (see chart).