FWC: Foster Wheeler Corp. Message Board

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Non-Tech : FWC: Foster Wheeler Corp.

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To: Dennis Roth who wrote (10)	5/8/2008 6:53:57 PM
From: Dennis Roth	of 11

Foster Wheeler Ltd. (FWLT): FWLT reports strong 1Q2008 earnings; maintain Buy rating - Goldman Sachs - May 08, 2008 What's changed FWLT posted better-than-expected EPS of $0.85 (excluding $0.10 asbestos-related gain), above the consensus estimate of $0.73 and the GS estimate of $0.79. The outperformance was due to: (1) strong revenue growth in E&C (69% vs. our estimate of 54%) and (2) solid scope EBITDA margins in both E&C (24.6% vs. the GS estimate of 22.0%) and Power (16.0% vs. the GS estimate of 11.0%). The Power Group benefited from $7.5 mn in commitment fees, which we believe to be one-time. Excluding this item, scope Power EBITDA margins were still an impressive 15.0%. On a slightly negative note, two key points to highlight: (1) E&C new awards were less than expected ($0.7 bn vs. our estimate of $1.3 bn) and (2) FWLT believes it may be seeing a slowdown in its NA Power business. Implications We believe the trade-off in FWLT shares today was unjustified given the strength of FWLT’s quarter. While E&C new awards may have been less than the market expected, scope new awards were in line with our expectations. Further, the company still believes Power (US is only about 9% of earnings) will be strong in 2008 and continue to grow in 2009. We maintain our Buy rating on FWLT shares as we continue to believe that FWLT is one of the best-positioned E&C companies in a capacity-constrained industry that is enjoying long-term pricing power. We are increasing our FY2008 and FY2009 estimates slightly to $3.44 and $4.14 from $3.34 and $4.02, respectively. We are also adjusting 2010-2012. Valuation We are increasing our 6-month price target slightly to $73 from $72. Our price target is based on a normalized P/E multiple of 21.0X. Key risks (1) Decline in oil prices and (2) project execution risks.

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