AmTech Downgrades Foster Wheeler (FWLT) to Neutral; Cuts PT to $25
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Broadpoint.AmTech downgrades Foster Wheeler (Nasdaq: FWLT) from Buy to Neutral, and also lowers its price target from $36 to $25.
The firm believes that Foster Wheeler "has broken its historical correlation with oil" given that, since November 20, the stock is up 70% while crude oil has fallen 32%. Broadpoint.AmTech attributes the strength to a wave of infrastructure buying on the back of President-elect Obama's proposed large-scale infrastructure package, but points out that "Foster Wheeler has virtually no exposure to stimulus spending."
With about 70% of its sales coming from oil & gas, the firm believes crude oil prices under $40 will "present a meaningful risk to backlog growth rates and earnings power", creating headwinds for Foster Wheeler moving forward. Further, the firm expects new flows in Q1 and Q2 of '09 to disappoint due as "global power markets soften and energy projects may take longer to convert from FEED to backlog/EPC execution."
Despite the negative view for '09, Broadpoint.AmTech believes Foster Wheeler's "strong balance sheet and pipeline of potential mega projects will deliver strong earnings growth..." over the long-term.
The firm also notes that it is maintaining Buy ratings on Quanta Services (NYSE: PWR), URS Corp. (NYSE: URS), and McDermott (NYSE: MDR).
Shares of Foster Wheeler are trading up about 1.3% today to $22.77 most recently.
Foster Wheeler, Ltd. and its subsidiaries provide construction and engineering services to the oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance sectors worldwide.
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