Tuesday, May 20, 2014

Seeking Alpha: FLSmidth Doing Better Than Expected Through The Trough

I may have been right about the serious impending erosion of orders, revenue, and EBITDA at FLSmidth (OTCPK:FLIDY) when I wrote about the company in June of 2013, but I missed the extent to which investors would cheer the company's cost-cutting and return improvement efforts. With the shares up 30% over the past year in U.S. dollars (and about 10% in the local Danish kroner), FLSmidth has handily outperformed most of its mining capex peers like Outotec (OTCPK:OUKPY) and Metso (OTCQX:MXCYY), as well as Joy Global (JOY).

I continue to believe that FLSmidth is looking at some challenging times in its end markets. Mining capex continues to fall and the company is facing more competition and consolidation in its large cement operations. Bold (but achievable) cost-cutting targets lead to me to a higher estimated fair value, but I have my doubts as to the company's ability to offset order declines with lower costs. Should orders continue to come in better than expected, though, and/or if the cycle isn't as bad as feared, FLSmidth's leverage to capex spending could send the shares higher.

Read more here:
FLSmidth Doing Better Than Expected Through The Trough

No comments: