Lazard Defends Fuel-Tech (FTEK)

Lazard Capital Markets has made a post-earnings call on Fuel-Tech, Inc. (NASDAQ:FTEK).  The brokerage firm has reiterated its Buy rating and $33.00 in an intraday research call.  Its reason: they expected this news. 

Lazard’s analyst for the alternative and clean energy sector, Sanjay Shrestha, also noted that the results reflect inherent lumpiness in bookings related to air pollution control (APC) projects and the timing of revenue and expenses in the company’s FUELCHEM segment.  He also noted "2Q results don’t alter our view of the company’s long-term growth prospects. In our July 30th earnings preview, we noted the potential for lower reported numbers and outlook for 2H07, reflecting the lumpy nature of bookings with utilities and percentage-of-completion accounting." The firm did lower its fiscal 2007 earnings revenue targets to $0.28 (from $0.42) and $80 million (from $92 million), respectively.

In the report, it is also noted that Fuel-Tech is well positioned to gain meaningfully in major international markets, particularly in China.  They expect the company to end 2007 with significant backlog that will set the stage for excellent growth in 2008/2009.  Lazard’s note also states "Our price target of $33 reflects a 25x multiple on our 2010E EPS of $1.60 discounted back one year at 20%. We believe the pullback in the shares represents an attractive entry point and risk/reward."  Maybe they are right.  We noted some problems this is starting to show in the model.  But shares were down over 10% and are now down less than 3%.  Despite the  high current P/E ratios, it looks like more traders are using this pullback as an opportunity to buy the stock on sale.

Jon C. Ogg
August 6, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.