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Will Fluor's (FLR) Business Diversity Help Brave Headwinds?
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On Mar 10, we issued an updated research on engineering and construction firm, Fluor Corporation (FLR - Free Report) .
After three consecutive misses, Fluor had reverted to the earnings beat track in third-quarter 2016. The company followed it up with another handsome beat in the recently reported fourth-quarter 2016. Adjusted earnings from continuing operations came in at 82 cents per share, beating the Zacks Consensus Estimate of 80 cents by 2.5%, and up 20.6% from the prior-year tally.
Also, fourth-quarter revenues of $4,989.6 million grew an impressive 14.2% year over year and topped the consensus mark. We believe the company’s restructuring initiatives, industry-leading franchise within the U.S., diligent management and proven business model proved to be major growth churners. Fluor’s market diversity remains a key strength that helps it mitigate the cyclicality of markets in which it operates.
Fluor, being an industry leader in nuclear remediation at government facilities throughout the U.S., is expected to benefit from rising demand for energy across the globe. This apart, the company believes there are significant opportunities in Power business, and Government and Infrastructure markets that bode well for growth. Currently, low natural gas prices continue to support investments in the North American chemicals projects and gas-fired power plants, which in turn hold tremendous scope for Fluor.
In addition, the recently passed Fixing America's Surface Transportation Act (“FAST”) is likely to boost spending on transportation infrastructure in the U.S., which is a huge positive. Based on the forecast of an uptick in consumer spending and growth in industrial production, the company believes that 2017 will hold better economic prospects than 2016. Also, President Trump’s pro-infrastructure policies are estimated to bring lucrative bids in 2017.
Moreover, the buyout of Dutch engineering and construction company – Stork Holding B.V. – has proved extremely profitable for the company’s “integrated solutions offerings.” Stork has been integrated with Fluor’s Operations & Maintenance business. Supported by Stork’s significant presence across multiple sites, Flour will be able to better address its client needs. During fourth-quarter 2016, Maintenance, Modification & Asset Integrity revenues were up 81.8% on a year-over-year basis, largely benefiting from the Stork buyout that bolstered sales at the Global Services unit.
Despite these positives, it is difficult to ignore the widespread macroeconomic challenges, which have severely restricted the company’s performance for the past several quarters. Current volatility in commodity prices and cyclical nature of the company’s commodity-based business lines pose significant challenges for Fluor. Lower commodity prices continue to impact cash flow of Fluor’s customers, which in turn, adversely affects their ability to fund new projects.
The company believes that clients of the Energy, Chemicals and Mining segment will maintain a cautious approach while taking investment decisions. Declining oil prices have also affected the speed of execution on certain existing projects. This apart, sluggish economic growth worldwide and softness in key geographic regions have also been posing challenges. These conditions are hurting the company’s non-oil and gas end markets.
The volatility in commodity prices is expected to hurt Fluor’s multiple segments, including the Energy, Chemicals, Mining and Maintenance Modification Asset Integrity segments. Other factors including stringent competition from peers like Jacobs Engineering Group Inc. , AECOM (ACM - Free Report) and KBR, Inc. (KBR - Free Report) , currency headwinds, adverse weather conditions and irrational bidding in feed pricing are likely to play as major spoilsport for the company.
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Will Fluor's (FLR) Business Diversity Help Brave Headwinds?
On Mar 10, we issued an updated research on engineering and construction firm, Fluor Corporation (FLR - Free Report) .
After three consecutive misses, Fluor had reverted to the earnings beat track in third-quarter 2016. The company followed it up with another handsome beat in the recently reported fourth-quarter 2016. Adjusted earnings from continuing operations came in at 82 cents per share, beating the Zacks Consensus Estimate of 80 cents by 2.5%, and up 20.6% from the prior-year tally.
Also, fourth-quarter revenues of $4,989.6 million grew an impressive 14.2% year over year and topped the consensus mark. We believe the company’s restructuring initiatives, industry-leading franchise within the U.S., diligent management and proven business model proved to be major growth churners. Fluor’s market diversity remains a key strength that helps it mitigate the cyclicality of markets in which it operates.
Fluor, being an industry leader in nuclear remediation at government facilities throughout the U.S., is expected to benefit from rising demand for energy across the globe. This apart, the company believes there are significant opportunities in Power business, and Government and Infrastructure markets that bode well for growth. Currently, low natural gas prices continue to support investments in the North American chemicals projects and gas-fired power plants, which in turn hold tremendous scope for Fluor.
In addition, the recently passed Fixing America's Surface Transportation Act (“FAST”) is likely to boost spending on transportation infrastructure in the U.S., which is a huge positive. Based on the forecast of an uptick in consumer spending and growth in industrial production, the company believes that 2017 will hold better economic prospects than 2016. Also, President Trump’s pro-infrastructure policies are estimated to bring lucrative bids in 2017.
Moreover, the buyout of Dutch engineering and construction company – Stork Holding B.V. – has proved extremely profitable for the company’s “integrated solutions offerings.” Stork has been integrated with Fluor’s Operations & Maintenance business. Supported by Stork’s significant presence across multiple sites, Flour will be able to better address its client needs. During fourth-quarter 2016, Maintenance, Modification & Asset Integrity revenues were up 81.8% on a year-over-year basis, largely benefiting from the Stork buyout that bolstered sales at the Global Services unit.
Despite these positives, it is difficult to ignore the widespread macroeconomic challenges, which have severely restricted the company’s performance for the past several quarters. Current volatility in commodity prices and cyclical nature of the company’s commodity-based business lines pose significant challenges for Fluor. Lower commodity prices continue to impact cash flow of Fluor’s customers, which in turn, adversely affects their ability to fund new projects.
The company believes that clients of the Energy, Chemicals and Mining segment will maintain a cautious approach while taking investment decisions. Declining oil prices have also affected the speed of execution on certain existing projects. This apart, sluggish economic growth worldwide and softness in key geographic regions have also been posing challenges. These conditions are hurting the company’s non-oil and gas end markets.
The volatility in commodity prices is expected to hurt Fluor’s multiple segments, including the Energy, Chemicals, Mining and Maintenance Modification Asset Integrity segments. Other factors including stringent competition from peers like Jacobs Engineering Group Inc. , AECOM (ACM - Free Report) and KBR, Inc. (KBR - Free Report) , currency headwinds, adverse weather conditions and irrational bidding in feed pricing are likely to play as major spoilsport for the company.
5 Trades Could Profit ""Big-League"" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>