LB Foster Co. FSTR, the premium business service providing company, recently fortified its Energy Services segment by securing the buyout deal of Inspection Oilfield Services (‘IOS’). The premeditated acquisition is expected to act as a strong platform, propelling the company’s growth plans in the near future.
Particulars and Payback
IOS is a prominent tubular management servicing company in the U.S. With headquarters at Houston, the company’s services are offered in almost all gas and oil producing hubs of the country. IOS, through specialized software, offers comprehensive information regarding the integrity of tubular assets for buyers. In order to maintain a high standard of quality, the company also applies superior inspection and testing technologies within its process.
IOS will, hereafter, function as a wholly owned subsidiary of LB Foster. This acquisition would help the latter leverage its existing asset base as well as lower overall operating costs. By including testing, conversion, inspection and logistics services in its business, LB Foster would be able to meet the requisites of a variable range of customers located across several oil & gas development regions of the U.S.
Amid the contemporary scenario which spells increasing scarcity of energy resources, all oil & gas development customers seek higher efficiency at lower costs. At this juncture, tactical association with IOS would equip LB Foster with skilled technicians and management expertise, to suitably cater to its oil & gas development clientele.
Moving Forward
LB Foster is a popular fabricator, manufacturer and distributor of products which are utilized in the railway, energy or construction markets. It is a leading friction management solutions provider in the global railway industry. The company’s solutions are used for increasing the efficiency of fuel consumption and lowering the depreciation of freight as well as transit railways. With a high brand value in the market, the company constantly aims to enhance its shareholders’ wealth.
Insights
Growth in its Construction and Rail segments drove LB Fosters’ impressive fourth-quarter results for 2014, and helped the company report a positive earnings surprise of 23.19%.
Through the acquisition of IOS, LB Foster aims to strengthen its business platform for the next earnings season. Given the fact that IOS reported $120 million in revenues for 2014 and witnesses steady growth in business at present, we believe this strategic association would serve to enhance LB Fosters’ earnings and revenues in 2015.
With a market capitalization of $462.47 million, LB Foster currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Kobe Steel Ltd. KBSTY, ThyssenKrupp AG TYEKF and Companhia Siderurgica Nacional SID. While both Kobe Steel Ltd. and ThyssenKrupp AG sport a Zacks Rank #1 (Strong Buy), Companhia Siderurgica Nacional carries a Zacks Rank #2 (Buy).
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