What Happened?
Shares of railway infrastructure company L.B. Foster (NASDAQ: FSTR) fell 3% in the afternoon session after a surprisingly weak August jobs report revealed the U.S. economy added far fewer jobs than anticipated.
The Bureau of Labor Statistics reported that non-farm payrolls rose by just 22,000, significantly missing the 75,000 expected by economists. Compounding the concerns, the unemployment rate climbed to 4.3%, its highest level in nearly four years. The report also included downward revisions to previous months' data, with June now showing the first net job loss since 2020. While a cooling labor market could encourage the Federal Reserve to cut interest rates, investors reacted negatively. The sharp slowdown in hiring sparked fears of a broader economic downturn, causing stocks to fall as the market weighed whether the Fed's potential actions would be enough to prevent a recession.
After the initial drop the shares shed some of the losses and rose to $26.36, down 3% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy L.B. Foster? Access our full analysis report here, it’s free.
What Is The Market Telling Us
L.B. Foster’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago when the stock gained 5.3% on the news that its second-quarter report showed improved profitability and a strong profit forecast that overshadowed an earnings miss.
While the company's GAAP earnings of $0.27 per share fell 47.6% short of Wall Street's estimates, and revenue of $143.6 million was roughly in line with expectations, investors focused on the positives. The company's adjusted EBITDA beat analyst estimates, coming in at $12.23 million, and its operating margin expanded significantly to 5.3% from 3.2% in the same quarter last year. Free cash flow also turned positive at $7.73 million. Looking forward, despite lowering its full-year revenue guidance, L.B. Foster's full-year EBITDA forecast of $42 million came in above consensus estimates, signaling underlying confidence in its profitability.
L.B. Foster is down 0.7% since the beginning of the year, and at $26.36 per share, it is trading 10.5% below its 52-week high of $29.45 from December 2024. Investors who bought $1,000 worth of L.B. Foster’s shares 5 years ago would now be looking at an investment worth $1,859.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
