Amec Foster Wheeler PLC Is My Top Growth Pick For 2015

Amec Foster Wheeler PLC (LON: AMFW) is my growth pick for 2015, here’s why.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Amec Foster Wheeler PLC (LSE: AMFW) (NYSE: AMFW) is a victim of the oil price rout. The company’s shares have plunged to a three-year low, following an aggressive sell-off in oil sector stocks. 

However, this has presented a great opportunity as now, Amec is extremely undervalued and there are a number of catalysts that could drive the company’s shares higher during 2015. So, here’s why Amec is my growth pick for 2015.

A rough year 

Amec has had a rough year. For the six months to June revenues dipped by 7%, from nearly £2bn to £1.85bn. Pre-tax profits fell around 30% from £118m to £83m. 

Management attributed this poor performance to currency headwinds, as well as the winding down of work on Canadian oil sands projects. Indeed, a strong pound reduced Amec’s order book growth to only 7% for the period, compared to 16% in constant currency. Most of Amec’s business is done in dollars, so the company is particularly susceptible to the dollar-sterling exchange rate. 

Still, Amec’s services are in demand and this is likely to continue despite the falling oil price. Specifically, Amec is not a pure oil and gas contractor the company is well diversified and has been branching out, away from greenfield upstream oil and gas markets, for some time.

Instead, Amec has been concentrating on the clean energy market and Middle Eastern Oil and Gas. Clean energy is the company’s fastest growing business. Amec also operates in the mining, nuclear power and infrastructure sectors.

Transformational deal 

All in all, Amec has a strong existing business model but the company’s acquisition of Foster Wheeler, which has only just been completed, is the real reason why I believe the company is set for growth during 2015. 

You see, the market has quickly written off this deal, despite the synergies and additional business it will generate for the company. 

Amec paid $3.3bn in cash and stock for Foster Wheeler, a global engineering conglomerate, which provides construction services, energy equipment, and environmental services to the petroleum, chemical, petrochemical, pharmaceutical, power markets — a well-diversified business. 

The merged entity is set to earn 95.9p per share during 2015, on revenues of £6.2bn. At present levels, this means that Amec is trading at a lowly forward P/E of 8.8. Moreover, Amec’s shares currently support a dividend yield of around 5%. The payout is covered twice by earnings per share. 

And even after Amec’s multi-billion dollar acquisition of Foster Wheeler, Amec is still on the hunt for bolt-on acquisitions that can bolster the company’s growth. Within the last week the group has acquired Scopus Group, a market-leading laser scanning, dimensional control and lean engineering company. 

Foolish summary 

Overall, Amec has been oversold and investors have failed to realise the company’s full potential. That’s why the group is the perfect growth pick for 2015.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »