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Fluor Secures 5-Year Maintenance Contract from Huntsman

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Fluor Corporation (FLR - Free Report) recently announced that its maintenance, modification and asset integrity segment – Stork – has clinched a five-year contract from chemical products manufacturer, Huntsman Corporation (HUN - Free Report) . The value of the contract has been kept under wraps and will be booked in first-quarter 2017.

The leading engineering and construction firm will offer maintenance services and aid small capital projects at four of Huntsman’s Texas-based chemical manufacturing sites. Fluor and Huntsman are long-standing partners, having worked on multiple projects across the globe. The recent contract win by Stork fortifies its position in the budding oil, gas and chemicals market along the U.S. Gulf Coast. Work on the four sites – Dayton, Conroe, Freeport and Port Neches – is scheduled to commence in mid-April.

With more than 200 sites in North America, Stork has a profound experience in multi-site execution. As a matter of fact, ever since the Stork buyout in 2016, Fluor has significantly strengthened its integrated solutions offerings, with Stork offering the company the perfect opportunity to better address 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 boosted sales at the Global Services unit.

We believe that the North American energy markets provide substantial opportunities for Fluor’s business prospects, with major projects awarded in sectors like petrochemical, liquefied natural gas and gas-to-liquid development. The long-term prospects of the company also remain strong, with life sciences, U.S. manufacturing and North American power and other end markets driving growth. 

Macro Woes Dampen Prospects

Despite lucrative contract wins and impressive market share, Fluor’s shares have returned 6.1% in the past six months, far lower than the Zacks categorized Engineering R/D Services industry's average positive return of 15.8%. Volatility in commodity prices and the cyclical nature of the company’s commodity-based business lines have proved to be major drags on the financial performance.

Furthermore, lingering softness in the mining and metals business continues to dampen lucrative commercial opportunities. Also, the company’s earnings estimates moved south over the past couple of months. Fluor has seen two downward estimate revisions compared to none upward, over the past 30 days. This has led the Zacks Consensus Estimate for 2017 to slip from $2.90 to $2.88, which indicates bearish analyst sentiment for the stock. Currently, the company carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks worth considering in the broader sector include II-VI Incorporated (IIVI - Free Report) and Dycom Industries (DY - Free Report) . Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

II-VI Incorporated has registered a remarkable positive average surprise of over 59.2% for the last four quarters, driven by four remarkable consecutive beats.

Dycom has a positive average earnings surprise of 17.30% for the last four quarters, having beaten estimates all through.

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