Everyone in this sector has reported earnings and it was not pretty. However, things are starting to look up again.
NEW BULLISH Plays
FWLT - Foster Wheeler $25.16
Foster Wheeler AG, formerly Foster Wheeler Limited, operates through two business groups: Global Engineering and Construction Group (Global E&C Group) and Global Power Group. The Global E&C Group, which operates worldwide, designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, chemical and petrochemical, pharmaceutical and biotechnology facilities and related infrastructure, including power generation and distribution facilities, and gasification facilities. The Global Power Group designs, manufactures and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities worldwide.
Why We Like It:
All of the construction and engineering stocks have reported earnings with a real mix of results. FWLT reported profits on 2/25 that fell -35% but they still beat the street. Foster dropped on a soft outlook. Several others in the group (MDR, FLR, SGR, URS, SHAW) also reported soft bookings but they all predicted stronger conditions as the year progressed. Each of the group had their volatility events on the announcements but all appear to be starting to trend higher again. Foster is a relatively cheap stock at $25 and that is strong support from last year. I am betting the worst is over and as the recovery signs begin increasing so will these stocks.
I am going to put a tight stop on it at just under the March first low. That gives us about $1.35 in cushion. The first target will be resistance at $28 and we will set a second target as we close in on that level. I could see a return to $35 later this year but I doubt we want to hold it in the newsletter that long.
BUY FWLT with a stop at $23.75.
BUY APR $26.00 CALL (FWLT 10D2600) Open interest = 658, ask=$1.15
Entry on March 04 at $xx.xx
Change since picked: + 0.00
Earnings Date N/A
Average Daily Volume: 4.5M
Listed on March 3rd, 2010