Jefferies: Sell AMEC Foster, Hold FMC Tech

Courtesy of Benzinga.

Although an oil price recovery from the January lows has improved market sentiment, contract-awarding clients continue to be “extremely cost focused,” which implies that it would be more realistic to expect a downward pressure on longer-term estimates, Jefferies’ Mark Wilson said in a report.

Sell AMFW

AMEC Foster Wheeler plc American Depositary Shares (NYSE: AMFW) [Rated: Underperform, PT: 310.00p] seems to be “levered up at the wrong time,” analyst Mark Wilson commented. He added that even including a Global Power Group sale in the forward projections, the stock had the highest risk in Jefferies’ coverage.

“AMFW’s Bear Case score shows a material increase in Financial Risk Profile and a negative DCF valuation. No GPG sale or a “low” price only increases the Bear Case financial risk,” Wilson wrote.

Buy The TEC-FTI Merger

While Technip [Rated: Buy, PT: €56] exhibited an improving risk profile heading into 2015, it could be increasingly affected going forward under the bear case, the analyst said. He added that the merger with FMC Technologies, Inc. (NYSE: FTI) [Rated: Hold, PT: $29] improved Technip’s financial risk profile back to very low levels.

Technip exhibited among the “most robust valuations to bear case scenarios in terms of both 2017 EV/EBITDA and longer term DCF,” Wilson added. He cited the stock as a Top Pick, “although with a longer term strategic quality enhanced by the proposed FTI merger.”

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