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Fluor (FLR) Hits 52-Weeks High: What's Aiding the Stock?

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Fluor Corporation (FLR - Free Report) scaled a new 52-week high of $29.65 on Mar 22, before closing the session marginally lower at $29.13.

In the past six months, this Zacks Rank #1 (Strong Buy) stock has gained 81.8% compared with 6.9% growth of the Zacks Engineering - R and D Services industry and 0.9% rise of the S&P 500 composite.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This engineering services firm has been benefiting from its focus on the “Building a Better Future” strategy. Diversified business, NuScale nuclear projects and cost-saving moves are helping the company generate solid results. However, supply chain disruptions, labor availability and inflationary pressure are exerting pressure on the bottom line.

What’s Driving the Company?

Strategic Moves: Fluor has been focusing on the “Building a Better Future” strategy that includes four strategic priorities. The first strategy drives 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. The third intends to reinforce financial discipline and maintain a solid balance sheet by generating predictable cash flow and earnings. The last strategy fosters a high-performance culture with purpose by advancing diversity, equity and inclusion efforts as well as promoting social progress and sustainability.

Diversification: 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.

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

Fluor continuously emphasizes cost control so that it can deliver not only the performance requirements specified by clients but also meets their budgetary needs.

Strong Liquidity: 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, up from $2.2 million at 2020-end. At 2021-end, the 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.

Prospects Look Good: For 2022, Fluor expects adjusted earnings per share of $1.15-$1.40 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. FLR expects to generate $2.50-$2.90 earnings per share by 2024.

The Zacks Consensus Estimate for 2022 earnings is currently pegged at $1.34 per share, reflecting 42.6% year-over-year growth. Impressively, estimates have moved 19.6% up in the past 30 days, reflecting analysts’ optimism over the future prospects. 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%.

The impressive performance is mainly attributable to a solid contract-winning spree, strong project execution, backlog level, and potential Energy Solutions, Urban Solutions and Mission Solutions businesses.

Other Top-Ranked Stocks From the Construction Sector

Sterling Construction Company, Inc. (STRL - Free Report) — a Zacks Rank #2 (Buy) company — has been benefiting from broad-based growth across the E-Infrastructure, Building and Transportation solutions segments.

Sterling’s earnings for 2022 are expected to grow 30.2%. STRL’s earnings estimates for the year have increased to $2.86 from $2.63 over the past 30 days.

AECOM (ACM - Free Report) — a Zacks Rank #2 company — is a leading solutions provider for supporting professional, technical and management solutions for diverse industries across end markets. ACM has been continuously focusing on delivering industry-leading margins and unlocking capital to promote growth as well as innovation. Also, focus on higher-margin and lower-risk Professional Services businesses bodes well.

AECOM’s earnings for fiscal 2022 are expected to grow 20.6%. AECOM’s earnings estimates for fiscal 2022 have increased to $3.40 from $3.30 over the past 60 days.

Lennar Corporation (LEN - Free Report) currently carries a Zacks Rank #2. This homebuilder continues to gain from effective cost control and focus on making its homebuilding platform more efficient, which in turn is resulting in higher operating leverage.

Lennar’s earnings are expected to grow 14.2% in fiscal 2022. LENs earnings estimates for fiscal 2022 have increased to $16.29 from $15.82 over the past seven days.


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