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Fluor Wins EPC Contract for SABIC's PPE Plant Recommissioning

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Fluor Corporation (FLR - Free Report) has received an engineering, procurement and construction management services or EPC contract by SABIC to recommission its polyphenylene ether (“PPE”) resin plant in Bergen op Zoom, the Netherlands.

Fluor will support SABIC’s proprietary family of modified compounds, NORYL resins, which are in high demand for its unique technology. The company will help SABIC to provide customers with a second source of NORYL resins across the world, especially in the European market. Notably, the Bergen op Zoom facility is anticipated to add more than 40% to its global capacity from the 2017 level.

The company will book the undisclosed contract value in first-quarter 2019 in the Energy & Chemicals business. This 14-month project started operating in January 2019.

Fluor has a solid track record of receiving awards, thereby helping it to drive growth. Recently, the company reported fourth-quarter 2018 results, wherein adjusted earnings of 77 cents surpassed the Zacks Consensus Estimate by 26.2% as well as increased 10% from the year-ago level.

During the quarter, the company recorded new awards of $8,783 million in the Energy & Chemicals business, significantly higher than $977 million a year ago. Also, backlog at the end of the quarter from the same segment amounted to $17.8 billion compared with $15.1 billion a year ago.

Meanwhile, shares of Fluor have underperformed the broader market in the past year. The underperformance mainly stemmed from the company’s lower-than-expected revenues in three of the trailing four quarters.

Nonetheless, Fluor remains optimistic about its end markets. This is because leading indicators for future capital spending in industrial production and capacity utilization are improving in several regions and industries.

At the end of 2018, the company’s consolidated backlog was $40 billion, up from $30.9 billion in the comparable year-ago period. The increase in backlog stemmed from new awards count, which is expected to generate higher revenues for the company in the future.

Fluor's total new awards recorded an increase of 212.2% on a year-over-year basis to $10.1 billion, courtesy of improvement in the commodities market owing to significant mining and Energy & Chemical contract wins, including chemical and refining work in the United States, iron ore expansion in Australia and copper projects in Latin America.

Zacks Rank & Stocks to Consider

Currently, Flour carries a Zacks Rank #5 (Strong sell). Some better-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corp. (GLDD - Free Report) , Altair Engineering Inc. (ALTR - Free Report) and Jacobs Engineering Group Inc. (JEC - Free Report) . While Great Lakes currently sports a Zacks Rank #1 (Strong Buy), Altair Engineering and Jacobs both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Great Lakes, Altair Engineering and Jacobs’ earnings for the current year are expected to increase 170.6%, 23.1% and 13.4%, respectively.

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