Railway infrastructure company L.B. Foster (NASDAQ: FSTR) missed Wall Street’s revenue expectations in Q3 CY2025, with sales flat year on year at $138.3 million. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $540 million at the midpoint. Its GAAP profit of $0.40 per share was 35% below analysts’ consensus estimates.

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John Kasel, President and Chief Executive Officer, commented, "We continued on a favorable trend in the third quarter, although the modest sales growth resulted in lower profitability compared to last year's high point realized in Q3. Sales were up 0.6%, while Adjusted EBITDA was down 7.9% driven primarily by lower margins for Precast Concrete within Infrastructure. Rail margins were also slightly lower, but this was primarily volume-timing related. With the improved customer demand and higher backlog in place, we expect a strong fourth quarter for both segments."

Company Overview

Founded with a $2,500 loan, L.B. Foster (NASDAQ: FSTR) is a provider of products and services for the transportation and energy infrastructure sectors, including rail products, construction materials, and coating solutions.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, L.B. Foster struggled to consistently increase demand as its $507.8 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of lacking business quality.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. L.B. Foster’s recent performance shows its demand remained suppressed as its revenue has declined by 3.6% annually over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. L.B. Foster’s backlog reached $247.4 million in the latest quarter and averaged 18.4% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for L.B. Foster’s products and services but raises concerns about capacity constraints.

This quarter, L.B. Foster’s $138.3 million of revenue was flat year on year, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 12% over the next 12 months, an improvement versus the last two years. This projection is admirable and implies its newer products and services will fuel better top-line performance.

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Operating Margin

L.B. Foster was profitable over the last five years but held back by its large cost base. Its average operating margin of 2.2% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, L.B. Foster’s operating margin rose by 2.2 percentage points over the last five years.

In Q3, L.B. Foster generated an operating margin profit margin of 6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for L.B. Foster, its EPS declined by 31.4% annually over the last five years while its revenue was flat. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

We can take a deeper look into L.B. Foster’s earnings to better understand the drivers of its performance. A five-year view shows L.B. Foster has diluted its shareholders, growing its share count by 2.1%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For L.B. Foster, its two-year annual EPS growth of 45.4% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q3, L.B. Foster reported EPS of $0.40, down from $3.27 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects L.B. Foster’s full-year EPS of $0.45 to grow 333%.

Key Takeaways from L.B. Foster’s Q3 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. The company also dropped its full-year revenue guidance Overall, this was a weaker quarter. The stock traded down 1.7% to $27.05 immediately following the results.

L.B. Foster underperformed this quarter, but does that create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.