LB Foster's Exposure To Price Fluctuations Raises Concerns

On Jun 7, 2016, we issued an updated research report on premium railroads manufacturing firm LB Foster Co. (NASDAQ:FSTR) . The company offers a variety of unique products and services to the rail, construction, energy and utility markets through its Rail, Products, Construction and Tubular Product segments.

Bearish Factors

Unfavorable business conditions, such as risks associated with commodity cycle, low civil construction expenses, weak American freight rail market spending and injudicious investments in highway projects have been weighing on LB Foster’s top line and bottom line. In fact, headwinds like these resulted in the company’s weak first-quarter 2016 results. LB Foster’s first-quarter loss was wider than the Zacks Consensus Estimate for loss. Also, the company remains exposed to stiff competition. In addition, hostile alterations in government spending pattern or raw input price fluctuations increase chances of revenue loss.

Scope for Growth

Though we remain apprehensive about the negatives weighing on this Zacks Rank #4 (Sell) stock’s near-term results, we expect certain favorable developments to partially offset such adversities. Factors like improved coated products, test & inspection services and precision measurement systems’ business are tailwinds that are likely to boost the company’s revenues and margins going ahead. Also, the company’s new Enterprise Resource Planning (‘ERP’) system is likely to enhance profitability in the near term.

Stocks to Consider

Some better-ranked stocks in the industry include ArcelorMittal (NYSE:MT) , Olympic Steel Inc. (NASDAQ:ZEUS) and Usinas Siderúrgicas de Minas Gerais S.A. (OTC:USNZY) . All the companies currently hold a Zacks Rank #2 (Buy).

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