L.B. Foster's (FSTR) Loss Narrows Y/Y In Q1, Sales Decline

Premium railroads service provider, L.B. Foster Company (NASDAQ:FSTR) reported loss of 23 cents per share in first-quarter 2017, narrower than the year-ago loss of 28 cents per share.

However, net sales in the reported quarter came in at $118.7 million, down 6% year over year.

Quarter in Details

Top-Line Performance

Sales of goods in the first quarter came in at $97.6 million, down 9.5% year over year. However, sales of services improved nearly 14.6% year over year to $21.1 million.

The company noted that total revenue during the quarter declined 6% year over year due to 12.2% fall in Rail Products and Services (Rail) segment sales, and 17.4% decrease in Tubular and Energy Services (Tubular) segment’s revenues. Downside in Rail segment’s sales was primarily stemmed by poor revenues generated from the domestic track components businesses. On the other hand, Tubular segment’s top-line performance deteriorated due to reduction in midstream-oriented precision measurement systems business. However, the company stated that the 17.1% year-over-year increment in the Construction Products (Construction) segment sales partially offset the impact of the other two segments' sales downsides.

Backlogs and Bookings

The company existed the quarter with a backlog of $195.3 million, up 26.8% year over year. First-quarter bookings surged 38% year over year to $162.7 million.

Costs and Margins

Total cost of sales during the quarter was $97.5 million, down 4.8% year over year. Selling, generate and administrative expenses declined 15.7% year over year to $19.2 million. Interest expenses in the quarter came in at $2.1 million compared with $1.2 million recorded in the year-ago quarter.

Gross profit margin in the reported quarter was 17.9%, down 110 basis points year over year. This downside was stemmed by weaker margins and volumes accrued from the Construction and Rail businesses. In addition, fall in the prices of domestic track component products was another headwind.

Balance Sheet and Cash Flow

Exiting first-quarter 2017, the company had cash and cash equivalents worth $33.8 million, up 12.2% from the end of 2016. Long-term debt came in at $145.1 million compared to $149.2 million recorded on Dec 31, 2016.

In the first quarter, L.B. Foster generated cash worth $10.7 million, as against $5.1 million cash used in the year-ago period.

Outlook

L.B. Foster is well poised to boost its business on the back of tailwinds prevailing in the transportation and energy infrastructure markets, efficient cost-control measures, as well as greater operational efficacy.

Our Take

Over the last one month, L.B. Foster’s shares yielded a return of 21.22%, outperforming the loss of 5.50% incurred by the Zacks categorized Steel - Producers industry.

Companies like ArcelorMittal (NYSE:MT) , Nucor Corporation (NYSE:NUE) and Acerinox, S.A. ANIOY are some other major stocks within the industry. L.B. Foster intends to reinforce its competency on the back of greater operational efficacy and robust Construction businesses sales.

However, on the other hand, dismal commodity pricing conditions or headwinds prevailing in the midstream, and upstream oil and gas markets might curtail near-term growth.

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