Fluor Corporation ( FLR Quick Quote FLR - Free Report) has been bolstering its prospects through a strong commitment to its "Building a Better Future" strategy, in addition to benefiting from the infrastructural initiatives of the U.S. administration and a diversified business portfolio. Shares of this engineering, procurement, construction and maintenance service provider have jumped 39.4% in the past six months, outperforming the Zacks Engineering - R and D Services industry’s 10.3% rise. Earnings estimates for 2023 and 2024 for the company have moved 10.8% and 1.9% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. Yet, the cyclical nature of the company’s business lines and intense competition pose a concern. Image Source: Zacks Investment Research
Nevertheless, Fluor — a Zacks Rank #3 (Hold) stock — has a favorable VGM Score of A. Our research shows that stocks with a
VGM Score of A or B offer the best investment opportunities to investors. Let’s delve into the major driving factors. Solid Backlog Level
In the third quarter of 2023, Fluor achieved success in securing consolidated new awards totaling $5 billion, aligning seamlessly with its annual plan to attain a book-to-burn ratio surpassing 1. A notable aspect is that 94% of these new awards are reimbursable. Fluor's overall backlog now stands at $26 billion, with 70% of it being reimbursable, highlighting the substantial demand for its services and the acknowledged value it delivers to clients. The company's strong service demand is evident through its robust prospect pipeline, where it is currently tracking a list of potential projects exceeding its existing backlog by more than 15 times. Key drivers for this demand include opportunities in the chemicals sector, closely followed by fuel production, as well as mining and metals.
Given the company’s positive advances on large Energy Solutions projects and continued progress on projects in its legacy portfolio, Fluor lifted its expectations for 2023. Biden’s Infrastructural Move
Fluor and similar engineering service providers are poised to gain from robust worldwide shifts toward infrastructure modernization, energy transition, bolstering national security, and the possibility of an extensive global surge in supply chain investments. The anticipated substantial increase in spending on infrastructure and public construction is a significant factor benefiting Fluor. This surge in funding is crucial for addressing the urgent need to revamp the nation's failing roads and bridges, while also supporting new initiatives focused on climate resilience and expanding broadband access.
The company has solid prospects, as is evident from the Zacks Consensus Estimate for 2023 and 2024 earnings per share (EPS) of $2.35 and $2.63, which indicates 186.6% and 11.9% year-over-year growth, respectively. Diversity in Business
Fluor continues to benefit from its market diversity, which serves as a crucial asset in reducing the impact of market fluctuations within its operational domains. The company's strategic approach of maintaining a well-balanced portfolio allows it to concentrate on the more resilient sectors of the business while seizing opportunities in cyclical markets when the timing is opportune. Additionally, Fluor's long-term outlook remains robust, with promising growth prospects in areas such as renewable energy, gas-fired combined cycle generation, and projects focused on achieving air emissions compliance for existing coal-fired power plants.
Cyclical Nature: The markets served by Fluor exhibit fluctuating patterns, and the company's clients are vulnerable to adverse economic conditions such as inflation, sluggish growth, or recessions. These factors may contribute to reduced capital investment and a decline in the demand for Fluor's services.
Intense Competition: Fierce competition within the global EPC industry has the potential to exert downward pressure on its contract prices and profit margins while simultaneously raising contractual risks. Key Picks Acuity Brands, Inc. ( AYI Quick Quote AYI - Free Report) currently sports a Zacks Rank of 1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here AYI delivered a trailing four-quarter earnings surprise of 12%, on average. The stock has declined 6.4% in the past year. The Zacks Consensus Estimate for AYI’s fiscal 2024 sales EPS indicates a decline of 3% and 4.7%, respectively, from a year ago. M-tron Industries, Inc. ( MPTI Quick Quote MPTI - Free Report) currently sports a Zacks Rank of 1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average. It has surged 290.7% in the past year. The Zacks Consensus Estimate for MPTI’s 2023 sales and EPS indicates growth of 30.6% and 156.7%, respectively, from the previous year. EMCOR Group, Inc. ( EME Quick Quote EME - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 10.6%, on average. Shares of EME have rallied 54.7% in the past year. The Zacks Consensus Estimate for EME’s fiscal 2024 sales and EPS indicates an improvement of 14.6% and 47.1%, respectively, from the prior-year levels.