L. B. Foster Company ((FSTR)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for L.B. Foster Company painted a mixed picture, highlighting both growth and challenges. The company showcased notable growth in the infrastructure segment and robust cash flow, yet faced hurdles in the rail segment and a dip in profitability. Despite these challenges, there is potential for future growth, driven by increased orders and a growing backlog.
Sales Growth in Infrastructure Segment
The Infrastructure segment of L.B. Foster Company demonstrated resilience with a 4.4% sales growth. This was particularly evident in the steel products division, which saw a significant 12.7% increase. This growth underscores the company’s strategic focus on strengthening its infrastructure offerings.
Strong Cash Generation
L.B. Foster reported strong cash generation, with $29.2 million provided by operations. This financial strength allowed the company to reduce its net debt to $55.3 million, improving its gross leverage from 1.9x to 1.6x, indicating a healthier balance sheet.
Increased Orders and Backlog
The company experienced a robust increase in orders, up 19.6% year-over-year, with the backlog at the quarter’s end reaching $247.4 million, an 18.4% rise from the previous year. This growth in orders and backlog positions L.B. Foster well for future revenue streams.
Total Track Monitoring Sales Surge
A remarkable highlight was the surge in total track monitoring sales, which increased by approximately 135%. This surge reflects the company’s successful efforts in expanding its market presence in this segment.
Rail Segment Order Growth
Despite challenges, the rail segment saw a 63.9% increase in orders, with the backlog improving by 58.2% year-over-year. This growth indicates a potential turnaround for the rail segment in the coming quarters.
Decline in Rail Revenues
However, the rail segment faced a 2.2% decline in revenues, attributed to the planned downsizing in the U.K. and the timing of rail distribution sales. This decline highlights the ongoing challenges within the rail segment.
Decreased Profitability
The company reported a decrease in profitability, with adjusted EBITDA down by $1 million and lower margins in both the rail and infrastructure segments. Net income also fell to $4.4 million from $35.9 million the previous year, partly due to the absence of a $30 million tax valuation release.
Order Cancellation in Infrastructure
The infrastructure segment faced a setback with a $19 million order cancellation in the Summit Protective coating order, impacting overall order growth.
Higher Production Costs
Higher production costs and an unfavorable sales mix led to a decline in gross profit, with margins down by 260 basis points in the infrastructure segment.
Forward-Looking Guidance
L.B. Foster’s forward-looking guidance remains optimistic, with expectations for a strong fourth quarter. The company projects approximately 25% sales growth, supported by a trailing 12-month book-to-bill ratio of 1.08:1 and a backlog increase of 18.4% to $247.4 million. This outlook suggests potential for recovery and growth in the near term.
In summary, L.B. Foster’s earnings call revealed a mixed sentiment, with growth in infrastructure and cash flow counterbalanced by challenges in the rail segment and decreased profitability. However, the company’s increased orders and backlog, coupled with strong forward-looking guidance, suggest a promising future trajectory.