Fluor Corporation (FLR Quick QuoteFLR - Free Report) is expected to gain from its intense focus on the “Building a Better Future” strategy, diversified business and NuScale nuclear projects. The company’s solid prospects for 2022, impressive new orders and cost-saving moves are adding to bliss.

FLR’s shares have gained almost 70% in the past six months against the Zacks Engineering - R and D Services industry’s 0.2% fall. The impressive performance was backed by a solid contract winning spree, strong project execution, backlog level, and potential Energy Solutions, Urban Solutions and Mission Solutions businesses.

Fluor has an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average being 140.7%.

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Although supply chain disruptions, labor availability and inflation are potential risks, decarbonization/energy transition projects will certainly drive growth.

Let’s delve deeper into the factors that justify its Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Drivers

Fluor has been focusing on the “Building a Better Future” strategy that includes four strategic priorities for driving shareholders’ value. The first strategy is to drive growth across portfolios by enhancing the markets outside the traditional oil and gas sector, including energy transition, advanced technology and life sciences, high-demand metals, infrastructure and mission solutions. The second one aims to pursue contracts with fair and balanced commercial terms that reward value, with a bias toward reimbursable contracts. Third, it intends to reinforce financial discipline and maintain a solid balance sheet by generating predictable cash flow and earnings. The last strategy is fostering a high-performance culture with purpose by advancing diversity, equity and inclusion efforts as well as promoting social progress and sustainability.

Fluor’s market diversity remains a key strength that helps the company mitigate the cyclicality of markets in which it operates. The company’s strategy of maintaining a good business portfolio mix permits it to focus on more stable business markets and capitalize on developing cyclical markets at suitable times. Further, Fluor continuously emphasizes on cost control so that it can deliver not only the performance requirements specified by clients but also their budgetary needs.

Fluor is presently focusing on transforming the EPC model into one integrated solution. Going forward, Fluor has plans to implement data analytics in projects, thereby minimizing risks and maximizing returns. These initiatives give Fluor the extra edge and a distinct competitive advantage.

These apart, this industry leader in nuclear remediation at government facilities throughout the United States is expected to benefit from the rising demand for energy across the globe. Fluor also has exclusive rights to service NuScale nuclear projects, the first of which is already in the pipeline.

For 2022, Fluor expects adjusted EPS of $1.15-$1.40 per share from continuing operations. In 2022, it assumed increased opportunities for new awards across all segments and continued progress on the company's cost optimization program. It projects a 10% increase in revenues, $50 million adjusted general & administrative expenses per quarter, and a tax rate of 28%. The company anticipates average full-year margins of 5% in Energy Solutions, 3.5-4.5% in Urban Solutions and 3.5% in Mission Solutions. Impressively, it expects to generate $2.50-$2.90 earnings per share by 2024.

Fluor maintains a strong balance sheet, liquidity and a well-structured debt maturity profile. Cash and cash equivalents as of Dec 31, 2021 came in at $2.21 billion, slightly up from $2.2 million at 2020-end. At 2021-end, long-term debt was $1.17 billion, down from $1.7 billion at 2020-end. In third-quarter 2021, Fluor deployed proceeds from the convertible preferred offering to tender 2023 and 2024 notes. The company’s strategic goal is to reduce the debt to capitalization ratio below 40% by 2024.

Some Better-Ranked Stocks From the Broader Construction Sector

Century Communities, Inc. (CCS Quick QuoteCCS - Free Report) : This Zacks Rank #1 homebuilder is banking on strong demand for affordable new homes and the strength of its competitive positioning and national footprint across 30 high-growth markets. CCS is optimistic about its online homebuying brand and expects Century Complete, which is 100% entry-level focused, to be the primary driver of organic growth in 2022 and beyond.

Century Communities’ earnings are expected to rise 19.1% year over year in 2022.

D.R. Horton, Inc. (DHI Quick QuoteDHI - Free Report) : This leading homebuilder currently sports a Zacks Rank #1. This Texas-based prime homebuilder continues to gain from industry-leading market share, a solid acquisition strategy, a well-stocked supply of land, lots, and homes along with affordable product offerings across multiple brands.

D.R. Horton’s earnings are expected to rise 38.5% year over year in fiscal 2022.

KB Home (KBH Quick QuoteKBH - Free Report) : This Los Angeles, CA-based homebuilder is well positioned, given a robust backlog level, a strong lineup of community openings and a solid return-focused growth model. With resilient U.S. housing market momentum, backlog value at fiscal fourth quarter-end grew 67% from a year ago to $4.95 billion, marking the highest fourth-quarter level since 2005.

Earnings for KB Home — currently sporting a Zacks Rank #1 — are expected to grow 67.9% in fiscal 2022.