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Fluor (FLR) Gains From Strategic Initiatives Amid High Costs
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Fluor Corporation (FLR - Free Report) has been gaining from its focus on the “Building a Better Future” strategy, diversified business and NuScale nuclear projects. Solid prospects across the business, impressive new orders and cost-saving moves are adding to the bliss.
Although FLR’s shares have declined significantly this year against the Zacks Engineering - R and D Services industry’s growth, earnings estimates for 2023 moved up in the past 30 days. This reflects investors’ optimism about the company’s growth potential. The uptrend is mainly backed by a contract-winning spree, strong project execution, a solid backlog level and impressive potential across its businesses.
However, additional costs on a legacy infrastructure project, a lack of contractual protection for the supply chain, labor escalation costs and labor availability, as well as intense competition, are major concerns.
Strategic Moves: Fluor has been focusing on the “Building a Better Future” strategy, which includes four strategic priorities for driving shareholders’ value.
The first strategy is to drive growth across portfolios by enhancing 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. Third, it intends to reinforce financial discipline and maintain a solid balance sheet by generating predictable cash flow and earnings. The last strategy is fostering a high-performance culture with purpose by advancing diversity, equity and inclusion efforts as well as promoting social progress and sustainability.
Diversified Business: Fluor’s market diversity remains a key strength that helps the company mitigate the cyclicality of the 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 has plans to implement data analytics into projects, thereby minimizing risks and maximizing returns.
Nuclear Projects Bode Well: 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 now owns 56% of the newly listed NuScale. The company expects NuScale to be an important part of its vision of providing a wide array of environmental solutions.
Major Concerns
FLR is witnessing supply chain and labor escalation costs, labor availability and the tempo of claims recovery negotiations with clients on some legacy infrastructure projects. Also, price volatility in the energy market and foreign currency translation are additional headwinds. Moreover, Fluor faces intense competition in the global engineering, procurement and construction industries, which can pressurize its contract prices and profit margins.
Stocks to Consider
Sterling Infrastructure, Inc. (STRL - Free Report) , currently carrying a Zacks Rank #2 (Buy), provides transportation, e-infrastructure and building solutions.
STRL’s expected earnings growth rate for 2023 is 11.4%.
Willdan Group, Inc. (WLDN - Free Report) , sporting a Zacks Rank #1 at present, is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN’s expected earnings growth rate for 2023 is 39.8%.
Howmet Aerospace Inc. (HWM - Free Report) , carrying a Zacks Rank #2 at present, is a global manufacturer of engineered products serving the aerospace, defense and commercial transportation industries. The company is expected to benefit from higher aircraft production rates and an easing of supply chains in the transportation market. Importantly, share gains in the titanium aerospace market are expected to act as a major tailwind to growth.
HWM’s earnings for 2023 are expected to grow 20.7%.
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Fluor (FLR) Gains From Strategic Initiatives Amid High Costs
Fluor Corporation (FLR - Free Report) has been gaining from its focus on the “Building a Better Future” strategy, diversified business and NuScale nuclear projects. Solid prospects across the business, impressive new orders and cost-saving moves are adding to the bliss.
Although FLR’s shares have declined significantly this year against the Zacks Engineering - R and D Services industry’s growth, earnings estimates for 2023 moved up in the past 30 days. This reflects investors’ optimism about the company’s growth potential. The uptrend is mainly backed by a contract-winning spree, strong project execution, a solid backlog level and impressive potential across its businesses.
However, additional costs on a legacy infrastructure project, a lack of contractual protection for the supply chain, labor escalation costs and labor availability, as well as intense competition, are major concerns.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors supporting this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Growth Drivers
Strategic Moves: Fluor has been focusing on the “Building a Better Future” strategy, which includes four strategic priorities for driving shareholders’ value.
The first strategy is to drive growth across portfolios by enhancing 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. Third, it intends to reinforce financial discipline and maintain a solid balance sheet by generating predictable cash flow and earnings. The last strategy is fostering a high-performance culture with purpose by advancing diversity, equity and inclusion efforts as well as promoting social progress and sustainability.
Diversified Business: Fluor’s market diversity remains a key strength that helps the company mitigate the cyclicality of the 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 has plans to implement data analytics into projects, thereby minimizing risks and maximizing returns.
Nuclear Projects Bode Well: 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 now owns 56% of the newly listed NuScale. The company expects NuScale to be an important part of its vision of providing a wide array of environmental solutions.
Major Concerns
FLR is witnessing supply chain and labor escalation costs, labor availability and the tempo of claims recovery negotiations with clients on some legacy infrastructure projects. Also, price volatility in the energy market and foreign currency translation are additional headwinds. Moreover, Fluor faces intense competition in the global engineering, procurement and construction industries, which can pressurize its contract prices and profit margins.
Stocks to Consider
Sterling Infrastructure, Inc. (STRL - Free Report) , currently carrying a Zacks Rank #2 (Buy), provides transportation, e-infrastructure and building solutions.
STRL’s expected earnings growth rate for 2023 is 11.4%.
Willdan Group, Inc. (WLDN - Free Report) , sporting a Zacks Rank #1 at present, is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN’s expected earnings growth rate for 2023 is 39.8%.
Howmet Aerospace Inc. (HWM - Free Report) , carrying a Zacks Rank #2 at present, is a global manufacturer of engineered products serving the aerospace, defense and commercial transportation industries. The company is expected to benefit from higher aircraft production rates and an easing of supply chains in the transportation market. Importantly, share gains in the titanium aerospace market are expected to act as a major tailwind to growth.
HWM’s earnings for 2023 are expected to grow 20.7%.