L. B. Foster Company ((FSTR)) has held its Q1 earnings call. Read on for the main highlights of the call.
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L.B. Foster Company recently held its earnings call, presenting a mixed sentiment that reflects both optimism and challenges. The company reported significant growth in infrastructure sales, backlog, and orders, while also acknowledging financial pressures from the Rail segment’s performance. This dual narrative paints a picture of a company poised for future growth, yet grappling with current challenges.
Infrastructure Sales Growth
Infrastructure sales saw a notable increase of 5% compared to last year, primarily driven by a substantial 33.7% rise in Precast Concrete sales. This growth underscores the company’s strong performance in the infrastructure segment, contributing positively to the overall financial outlook.
Rail Backlog Increase
The Rail segment experienced a significant 46.9% increase in backlog during the quarter. This surge indicates improved project funding and higher bidding levels, suggesting a potential rebound in the Rail segment’s future performance.
Order and Backlog Growth
Order rates increased by 39.1% sequentially and 12.6% over the previous year, resulting in a backlog increase of $51.3 million during the quarter. This growth in orders and backlog is a positive indicator of the company’s future revenue streams.
Share Buyback Program
L.B. Foster authorized a new three-year, $40 million stock buyback program, with approximately 1.5% of shares repurchased in the first quarter. This move reflects confidence in the company’s financial health and a commitment to returning value to shareholders.
Improved Infrastructure Orders
Infrastructure orders rose by 35.3% over the prior year quarter, with a notable $12 million backlog increase in Protective Coatings. This improvement highlights the company’s robust demand in the infrastructure sector.
Rail Segment Sales Decline
The Rail segment faced a 34.6% decline in sales due to weak distribution demand, leading to a significant 69.3% decrease in adjusted EBITDA. This decline presents a challenge that the company needs to address moving forward.
Net Debt Increase
Net debt rose to $79.9 million during the quarter, with the gross leverage ratio increasing to 2.5 times compared to 2.2 times last year. This increase in debt levels is a point of concern that the company will need to manage carefully.
Decline in Gross Profit Margin
The gross profit margin declined by 50 basis points to 20.6%, primarily due to lower Rail sales and an unfavorable mix within the Rail segment. This decline reflects the challenges faced in maintaining profitability amidst shifting market dynamics.
Negative Operating Cash Flow
Operating cash flow was negative, with a use of $26.1 million, reflecting normal seasonal patterns and increased working capital needs. This cash flow situation underscores the financial pressures the company is currently navigating.
Forward-Looking Guidance
Despite a challenging start to the year, L.B. Foster remains optimistic about the rest of 2025. The company maintains its full-year guidance, supported by strong backlog growth and favorable demand drivers. They anticipate improved sales volumes and profitability in the second quarter, aligning with typical seasonal patterns.
In summary, L.B. Foster’s earnings call revealed a company in transition, with strong infrastructure growth and backlog increases offset by challenges in the Rail segment and rising debt levels. The overall sentiment is cautiously optimistic, with expectations for improved performance as the year progresses.