Sliding construction stocks mean promising buy levels

While the global construction industry has been recovering from the Great Recession, stocks like Foster Wheeler (FWLT, quote), Caterpillar, (CAT, quote) and Fluor Corporation (FLR, quote) are giving back gains registered earlier this year. 

CAT construction equipment services the global consumer class.

That is not a bullish development, but it is an opportunity to pick up good shares at bargain prices.

Foster Wheeler AG is up 13.79% for 2012. However, the Swiss company has fallen 4.31% for the last week of trading and 6.32% over the last month. 

Fluor Corporation is telling the same story: up 17.40% for the year, but down 2.08% for the last month. The global bellwether stock of Caterpillar, the world’s largest heavy equipment maker, has fallen 2.77% for the last week and 6.08% in the last month.

Despite the stock performance, the financial indicators for each company are promising. On a quarterly basis, sales growth and earnings-per-share growth are rising for Caterpillar. Now at 14, the price-to-earnings ratio is projected to fall to 9.15, well below the average ratio of 15 for the S&P 500.

The most bullish indicator for Caterpillar is its strong price-to-earnings growth ratio of 0.58. According to investment legend Peter Lynch, this is one of the most important indicators. A price-to-earnings growth ratio of 1 is adequate, and lower is better.

Fluor also has promising financial indicators. Its price-to-sales is 0.43. Earnings-per-share growth this year is up 72.19%. The mean analyst rating for Fluor Corporation is 1.70, close to the best rating of 1.

Foster Wheeler AG’s price-to-sales and forward price-to-earning ratios are appealingly low at .52 and 9.90, respectively. The 29.82% quarterly earnings-per-share growth is nice and high though.

Like the expanding global consumer market, the global construction market has a promising future. Demand for buildings of all types will eventually rise, and the construction industry will grow with it.


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