Railway infrastructure company L.B. Foster (NASDAQ:FSTR) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 5% year on year to $128.2 million. The company’s full-year revenue guidance of $560 million at the midpoint came in 2.1% below analysts’ estimates. Its GAAP loss of $0.02 per share was significantly below analysts’ consensus estimates.
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L.B. Foster (FSTR) Q4 CY2024 Highlights:
- Revenue: $128.2 million vs analyst estimates of $130.8 million (5% year-on-year decline, 2% miss)
- EPS (GAAP): -$0.02 vs analyst estimates of $0.12 (significant miss)
- Adjusted EBITDA: $7.24 million vs analyst estimates of $9.2 million (5.6% margin, 21.3% miss)
- Management’s revenue guidance for the upcoming financial year 2025 is $560 million at the midpoint, missing analyst estimates by 2.1% and implying 5.5% growth (vs -1.9% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $45 million at the midpoint, above analyst estimates of $44.6 million
- Operating Margin: 2.4%, up from -0.1% in the same quarter last year
- Free Cash Flow Margin: 10%, down from 14.8% in the same quarter last year
- Backlog: $185.9 million at quarter end
- Market Capitalization: $279 million
Company Overview
Founded with a $2,500 loan, L.B. Foster (NASDAQ:FSTR) is a provider of products and services for the transportation and energy infrastructure sectors, including rail products, construction materials, and coating solutions.
General Industrial Machinery
Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, L.B. Foster’s demand was weak and its revenue declined by 1.5% per year. This was below our standards and suggests it’s a low quality business.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. L.B. Foster’s annualized revenue growth of 3.3% over the last two years is above its five-year trend, but we were still disappointed by the results. 
This quarter, L.B. Foster missed Wall Street’s estimates and reported a rather uninspiring 5% year-on-year revenue decline, generating $128.2 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 7.8% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will fuel better top-line performance.
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Operating Margin
L.B. Foster was profitable over the last five years but held back by its large cost base. Its average operating margin of 2% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.
Looking at the trend in its profitability, L.B. Foster’s operating margin might fluctuated slightly but has generally stayed the same over the last five years, meaning it will take a fundamental shift in the business to change.
In Q4, L.B. Foster generated an operating profit margin of 2.4%, up 2.5 percentage points year on year. The increase was encouraging, and since its operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as marketing, R&D, and administrative overhead.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
L.B. Foster’s EPS grew at a weak 3.4% compounded annual growth rate over the last five years. This performance was better than its 1.5% annualized revenue declines, but we take it with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For L.B. Foster, its two-year annual EPS growth of 70.8% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q4, L.B. Foster reported EPS at negative $0.02, up from negative $0.04 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects L.B. Foster’s full-year EPS of $3.91 to shrink by 52.9%.
Key Takeaways from L.B. Foster’s Q4 Results
It was good to see L.B. Foster provide full-year EBITDA guidance that slightly beat analysts’ expectations. On the other hand, its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a mixed quarter, and the market seems to be focused on the encouraging EBITDA guidance for the year. The stock traded up 5.2% to $27.23 immediately after reporting.
Big picture, is L.B. Foster a buy here and now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.