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Fluor-BWX JV Wins $13B Hanford Site Tank Closure Contract

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Hanford Works Restoration, LLC — a joint venture between Fluor Corporation (FLR - Free Report) and a subsidiary of BWX Technologies, Inc. (BWXT - Free Report) — has been awarded the Tank Closure Contract by the U.S. Department of Energy (“DOE”) at the DOE’s Hanford Site. This contract is valued at up to $13 billion and spans for a 10-year period.

Contract Details

Per the contract, Hanford Works Restoration or HWR will provide services for the transition from the current tank operations contract to the tank closure contract. The services include the operations and maintenance of the single-shell and double shell tank farms including volume management and secondary waste treatment facilities. The team will also complete the construction and operations and maintenance of equipment necessary to pretreat and feed low-level waste to the low-activity waste verification facility, and single-shell tank waste remediation and closure to support the Hanford Site environmental cleanup.

The HWR team includes two pre-selected small businesses, namely DBD and INTERA, which provide specialized modeling and regulatory expertise, respectively.

Fluor’s Government Business Bodes Well

Fluor has been associated with Hanford since 1996, when it was awarded with a contract to manage most of the site’s cleanup work. Per the president of Fluor’s Government Group, Tom D’Agostino, “We look forward to working with the incumbent Tank Farm employees, DOE, the regulators, and other Hanford contractors to shift to a unified closure mentality and safely accelerate the completion timeline.”

During third-quarter 2019, Fluor planned to sell the Government segment. On Feb 18, 2020, the company announced that it has withdrawn plans to sell the segment, as it has gained confidence in its solid liquidity position and viable options for generating cash flow. The business will cease to be reported as a discontinued operation from first-quarter 2020.

Meanwhile, Fluor is unable to file its Form 10-Q on time, and is reviewing its prior period reporting and related control environment, as well as completing its Form 10-K for 2019.

In February 2020, the company announced preliminary fourth-quarter and 2019 numbers for a few metrics. According to preliminary results, new awards were $2.2 billion in 2019 and $146 million in the fourth quarter for the Government segment. Backlog at the end of 2019 is expected to be $3.8 billion.

Shares of the company have rallied more than 23% in the past month compared with the Zacks Engineering - R And D Services industry’s 9.6% increase. We believe new contract wins will help the company to drive growth. Over the last few quarters, major wins have enabled Fluor to expand long-term recurring revenue opportunities.

Zacks Rank & Key Picks

Currently, Fluor currently carries a Zacks Rank #4 (Sell).

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

Some better-ranked stocks in the broader construction sector include Howmet Aerospace Inc. (HWM - Free Report) and Otis Worldwide Corporation (OTIS - Free Report) , each holding a Zacks Rank #2 (Buy).

Howmet Aerospace’s trailing 12-month return on equity is 22.1%, higher than the industry’s 8.2%.

Otis’ three-five year expected EPS growth rate is 5%.

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