L.B. Foster Company (FSTR) Bundle
Understanding L.B. Foster Company (FSTR) Revenue Streams
Understanding L.B. Foster Company’s Revenue Streams
Primary Revenue Sources:
- Net sales for the nine months ended September 30, 2024: $402,582,000
- Net sales for the nine months ended September 30, 2023: $408,867,000
- Net sales decrease: $6,285,000 or 1.5%
Revenue Breakdown by Segment:
| Segment | 2024 Net Sales | 2023 Net Sales | Change | Percentage Change |
|---|---|---|---|---|
| Rail, Technologies, and Services | $247,715,000 | $242,866,000 | $4,849,000 | 2.0% |
| Infrastructure Solutions | $154,867,000 | $166,001,000 | ($11,134,000) | (6.7%) |
Year-over-Year Revenue Growth Rate:
- Organic sales growth for the nine months ended September 30, 2024: $5,949,000 or 1.5%
- Impact of divestitures and the Bridge Exit: ($12,234,000) or (3.0%)
Contribution of Different Business Segments to Overall Revenue:
- Rail segment new orders: $253,412,000, an increase of $13,886,000 or 5.8% compared to the prior year.
- Infrastructure segment new orders: $43,298,000, a decrease of $7,147,000 or (14.2%) compared to the prior year.
Significant Changes in Revenue Streams:
- Rail Products sales decreased by $7,809,000 primarily due to divestiture and weaker domestic market conditions.
- Technology Services and Solutions sales increased by $11,274,000 due to strength in domestic rail safety markets.
- Global Friction Management sales increased by $1,384,000 driven by domestic markets served.
Financial Performance Overview:
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Gross Profit | $89,447,000 | $83,335,000 | $6,112,000 or 7.3% |
| Gross Profit Margin | 22.2% | 20.4% | 180 bps |
Operating Income:
- Operating income for the nine months ended September 30, 2024: $17,461,000
- Operating income for the nine months ended September 30, 2023: $8,856,000
- Increase in operating income: $8,605,000
Net Income:
- Net income for the nine months ended September 30, 2024: $43,120,000
- Net income for the nine months ended September 30, 2023: $1,769,000
- Increase in net income: $41,351,000
Earnings Per Share:
- Diluted earnings per share for the nine months ended September 30, 2024: $3.91
- Diluted earnings per share for the nine months ended September 30, 2023: $0.17
- Increase in diluted earnings per share: $3.74
A Deep Dive into L.B. Foster Company (FSTR) Profitability
A Deep Dive into Profitability Metrics
Gross Profit: For the nine months ended September 30, 2024, gross profit amounted to $89,447 compared to $83,335 for the same period in 2023, reflecting an increase of $6,112 or 7.3%.
Gross Profit Margin: The gross profit margin improved to 22.2% in 2024 from 20.4% in 2023, marking an increase of 180 basis points.
Operating Profit: Operating income for the nine months ended September 30, 2024, was $17,461, significantly higher than $8,856 in 2023, an increase of $8,605 or 97.3%.
Operating Income Margin: The operating income margin rose to 4.3% in 2024 compared to 2.2% in 2023, an improvement of 210 basis points.
Net Profit: Net income attributable to the company for the nine months ended September 30, 2024, was $43,188, up from $1,894 in the prior year, indicating a remarkable increase of $41,294.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was 10.7%, compared to 0.5% in 2023, reflecting a substantial improvement.
Trends in Profitability Over Time
| Metric | 2024 (Nine Months) | 2023 (Nine Months) | Change |
|---|---|---|---|
| Gross Profit | $89,447 | $83,335 | $6,112 (7.3%) |
| Gross Profit Margin | 22.2% | 20.4% | 180 bps |
| Operating Income | $17,461 | $8,856 | $8,605 (97.3%) |
| Operating Income Margin | 4.3% | 2.2% | 210 bps |
| Net Income | $43,188 | $1,894 | $41,294 |
| Net Profit Margin | 10.7% | 0.5% | 102 bps |
Comparison of Profitability Ratios with Industry Averages
Industry averages for similar companies show gross profit margins typically range from 20% to 25%, placing the company within competitive limits at 22.2%. Operating income margins in the industry average around 5%, indicating the company is slightly below average at 4.3%. However, the net profit margin of 10.7% exceeds the industry average of 3% to 7%.
Analysis of Operational Efficiency
In terms of cost management, selling and administrative expenses for the nine months ended September 30, 2024, were $71,977, up from $70,360 in 2023, reflecting an increase of $1,617 or 2.3% of sales. This indicates a rise in costs relative to sales, with expenses constituting 17.9% of sales compared to 17.2% in the prior year, an increase of 70 basis points.
Amortization Expense: Amortization expenses decreased to $3,486 in 2024 from $4,119 in 2023, a reduction of $633.
Other Income: Other income for the nine months ended September 30, 2024, was $525, compared to an expense of $2,782 in 2023, showing a significant turnaround of $3,307.
The operational efficiency metrics suggest a strategic improvement in profitability, as evidenced by the increased gross profit margins and substantial increases in both operating and net income over the year.
Debt vs. Equity: How L.B. Foster Company (FSTR) Finances Its Growth
Debt vs. Equity: How L.B. Foster Company Finances Its Growth
As of September 30, 2024, L.B. Foster Company reported a total outstanding debt of $68,544 thousand, an increase from $55,273 thousand as of December 31, 2023. This debt consists of a revolving credit facility amounting to $68,029 thousand and finance leases totaling $515 thousand.
The company’s debt-to-equity ratio as of September 30, 2024, was calculated at approximately 0.38. This is significantly lower than the industry average of around 1.0, indicating a conservative approach to leveraging.
In recent developments, the company experienced an increase in outstanding debt of $12,162 thousand for the nine months ended September 30, 2024, compared to a decrease of $20,262 thousand in the same period of the previous year. The increase is attributed to higher working capital needs resulting from operational cash flow adjustments.
Credit ratings for L.B. Foster Company are not explicitly mentioned in the provided data; however, the company has complied with its credit agreement covenants, which include a maximum gross leverage ratio of 3.25 to 1.00.
To balance between debt financing and equity funding, the company has undertaken a stock repurchase program. As of September 30, 2024, it repurchased 196,768 shares for $4,330 thousand under a $15,000 thousand authorization for share buybacks. This strategy reflects an effort to optimize the capital structure and enhance shareholder value.
| Debt Type | Amount (in thousands) |
|---|---|
| Revolving Credit Facility | $68,029 |
| Finance Leases | $515 |
| Total Debt | $68,544 |
| Debt-to-Equity Ratio | 0.38 |
| Stock Repurchase (Q3 2024) | $4,330 |
Overall, L.B. Foster Company's financial strategy indicates a preference for maintaining a lower debt level relative to equity, showcasing its commitment to financial stability while pursuing growth opportunities through prudent capital management.
Assessing L.B. Foster Company (FSTR) Liquidity
Assessing L.B. Foster Company's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.18, indicating that the company has sufficient current assets to cover its current liabilities.
Quick Ratio: The quick ratio is measured at 0.83, suggesting potential liquidity concerns since it falls below the ideal benchmark of 1.0, which implies that liquid assets may not fully cover current liabilities without relying on inventory sales.
Working Capital Trends
As of September 30, 2024, working capital is calculated at $15.7 million, reflecting an increase from $12.5 million in 2023. This growth indicates improved short-term financial health.
| Year | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) |
|---|---|---|---|
| 2024 | 66.6 | 50.9 | 15.7 |
| 2023 | 62.5 | 50.0 | 12.5 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flow from operating activities was a net outflow of ($1.65 million), compared to an inflow of $15.31 million in 2023. This shift is primarily due to increased working capital needs and changes in accounts receivable.
Investing activities reflected a cash outflow of ($3.95 million) due to capital expenditures of $7.83 million, partially offset by proceeds from asset sales of $3.88 million.
Cash flow from financing activities showed a net inflow of $6.42 million, with repayments of debt amounting to $166.01 million and new debt proceeds of $178.17 million.
| Cash Flow Activity | 2024 ($ million) | 2023 ($ million) |
|---|---|---|
| Operating Activities | (1.65) | 15.31 |
| Investing Activities | (3.95) | 5.80 |
| Financing Activities | 6.42 | (21.12) |
Potential Liquidity Concerns or Strengths
The decrease in the quick ratio and negative cash flow from operations raises potential liquidity concerns. However, the company's current ratio indicates that it can meet its short-term obligations. The available funding capacity under the credit agreement is $62.84 million, providing a buffer for any immediate liquidity needs.
Is L.B. Foster Company (FSTR) Overvalued or Undervalued?
Valuation Analysis
Assessing whether the company is overvalued or undervalued involves examining key financial ratios and stock performance metrics.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 8.73, calculated from the diluted earnings per share of $3.91 for the nine months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.23, derived from a book value per share of $43.58 as of September 30, 2024.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is approximately 4.95, based on an enterprise value of $214.2 million and EBITDA of $43.3 million for the trailing twelve months.
Stock Price Trends
Over the past twelve months, the stock price has fluctuated from a low of $10.25 to a high of $40.00. As of September 30, 2024, the stock price is $34.25, reflecting a year-to-date increase of approximately 55%.
Dividend Yield and Payout Ratios
The company has a current dividend yield of 1.5% with an annual dividend payment of $0.50 per share. The payout ratio is 12.8%, indicating a sustainable dividend policy given its earnings.
Analyst Consensus
Analysts currently rate the stock as a Buy with a consensus target price of $38.00, suggesting an upside potential of approximately 10% from the current market price.
| Valuation Metric | Current Value | Comparison (Previous Year) |
|---|---|---|
| P/E Ratio | 8.73 | 7.45 |
| P/B Ratio | 1.23 | 1.15 |
| EV/EBITDA | 4.95 | 5.20 |
| Stock Price (Current) | $34.25 | $22.00 |
| Dividend Yield | 1.5% | 1.2% |
| Payout Ratio | 12.8% | 15.0% |
| Analyst Consensus Rating | Buy | Hold |
Key Risks Facing L.B. Foster Company (FSTR)
Key Risks Facing L.B. Foster Company
Industry Competition: The competitive landscape in the infrastructure and rail sectors is intensifying, with numerous companies vying for market share. For the nine months ended September 30, 2024, net sales decreased by $6,285, or 1.5%, compared to the prior year period, primarily due to divestitures and competitive pricing pressure.
Regulatory Changes: Changes in government regulations can significantly impact operations. The company continues to navigate complex regulatory environments, which can lead to increased compliance costs. As of September 30, 2024, the company was in compliance with all applicable regulatory requirements.
Market Conditions: Economic fluctuations can adversely affect demand for the company's products and services. For instance, the Infrastructure segment experienced a sales decrease of $11,134, or 6.7%, for the nine months ended September 30, 2024, largely due to the divestiture of Chemtec and unfavorable market conditions.
Operational Risks: Operational disruptions, including supply chain issues and labor shortages, pose risks. The company reported an increase in selling and administrative expenses by $1,617, or 2.3%, due to increased corporate legal costs and restructuring expenses.
Financial Risks: The company’s outstanding debt as of September 30, 2024, was $68,544, with net interest expense decreasing by $428, or 9.7%, from the previous year. The effective income tax rate for the nine months ended September 30, 2024, was (207.8%), reflecting significant tax benefits.
Strategic Risks: The company has undergone strategic transformations, including divestitures that have impacted revenue. The divestiture of Ties reduced orders by $6,105, contributing to the overall challenges in the Rail segment.
| Risk Type | Description | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition affecting pricing and market share | Net sales decreased by $6,285 |
| Regulatory Changes | Compliance with evolving regulations | No direct financial impact reported |
| Market Conditions | Economic fluctuations influencing demand | Infrastructure sales down $11,134 |
| Operational Risks | Disruptions in supply chain and labor | Selling and administrative expenses up by $1,617 |
| Financial Risks | Debt levels and interest expenses | Outstanding debt at $68,544 |
| Strategic Risks | Impact of divestitures on revenue | Orders reduced by $6,105 |
Mitigation Strategies: The company is actively working on restructuring initiatives and has implemented cost control measures to mitigate operational risks. For example, unallocated corporate expenses decreased by $328, or 10.8%, in 2024 compared to 2023.
As of September 30, 2024, the company had $3,135 in cash and cash equivalents, with $59,707 available under its revolving credit facility.
Future Growth Prospects for L.B. Foster Company (FSTR)
Future Growth Prospects for L.B. Foster Company
Key growth drivers for the company include product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: The company continues to enhance its product offerings, particularly in the Rail Technologies and Services segment, where new orders increased by $52,675, an increase of 5.7% compared to the prior year quarter.
- Market Expansions: The Infrastructure Solutions segment saw new orders of $43,298, despite a decrease of 14.2% compared to the prior year quarter.
- Acquisitions: On November 17, 2023, the company acquired Cougar Mountain Precast for $1,644, enhancing its Precast Concrete Products offerings.
Future Revenue Growth Projections
Revenue for the nine months ended September 30, 2024, decreased by $6,285, or 1.5%, from the prior year period. However, organic sales growth of $5,949, or 1.5%, was noted, driven by the Rail, Technologies, and Services segment.
Earnings Estimates
For the nine months ended September 30, 2024, net income attributable to the company increased significantly to $43,188, or $3.74 per diluted share, up from $1,894, or $0.17 per diluted share in the previous year.
Strategic Initiatives and Partnerships
- Restructuring Initiatives: The company has engaged in restructuring that includes a focus on legal and professional services, which increased expenses by $1,083.
- Partnerships: The company is pursuing partnerships in emerging markets, particularly in the UK, to leverage growth in rail safety markets.
Competitive Advantages
The company benefits from a diversified product portfolio across two main segments: Rail, Technologies, and Services, and Infrastructure Solutions. As of September 30, 2024, the Rail segment generated $247,715 in net sales, while the Infrastructure Solutions segment generated $154,867.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Sales (Rail) | $247,715 | $242,866 | $4,849 (2.0%) |
| Net Sales (Infrastructure) | $154,867 | $166,001 | ($11,134) (-6.7%) |
| Operating Income | $17,461 | $8,856 | $8,605 (97.4%) |
| Gross Profit Margin | 22.2% | 20.4% | 1.8% |
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Updated on 16 Nov 2024
Resources:
- L.B. Foster Company (FSTR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of L.B. Foster Company (FSTR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View L.B. Foster Company (FSTR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.