Premium railroads service provider L.B. Foster Company 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.
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. ANGGY, Olympic Steel, Inc. ZEUS and Schnitzer Steel Industries, Inc. 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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