Fluor Corp. Reiterated at Neutral - Analyst Blog
July 05 2012 - 12:54PM
Zacks
We maintain a Neutral recommendation on Fluor
Corporation (FLR).
The company posted robust top-line and bottom-line results
during first-quarter 2012, with its revenue increasing 24% year
over year. Fluor’s benefactor for the quarter was a significant
rise in Industrial & Infrastructure, Oil & Gas and Global
Services revenues. The international market for oil & gas
production and refining and mining were also strong.
However, the company’s overall cost and expenses increased
significantly by 24.6%, slightly affecting its earnings before
taxes. Further, uncertain economic conditions remain a matter of
concern. As such we prefer to remain on sidelines.
Fluor serves a diverse set of industries worldwide, including
oil and gas, chemical and petrochemicals, transportation, mining
and metals, power, life sciences and manufacturing. It is also a
primary service provider to the U.S. federal government. The
company’s prime competitor is Jacob Engineering
Group (JEC).
Fluor is one of the few engineering and construction companies
with the technological expertise, logistics and procurement
capabilities, and project management experience needed to execute
on a large variety of projects. Its favorable contract mix, diverse
service offerings and strong relationships around the world allow
it to sustain operating margin going forward relative to its peers
without diminishing growth potential.
The company is performing quite well. New awards in
first-quarter 2012 continued to be strong at $8.4 billion while new
awards were $26.9 billion in 2011. The company is benefiting from
substantial increase in mining & metals volume, as well as
sizable orders within the Oil & Gas segment. Further, Fluor’s
international marketremains robust, with 84% of awards derived from
outside the US in 2011 with focus on Australia, the Middle East,
Latin America and Canada.
However, backlog is subject to unexpected adjustments and
cancellations; therefore, it may not be a reliable indicator of
future earnings. Its government contracts may be terminated at any
point of time. Moreover, if it does not comply with restrictions
and regulations imposed by the government, contracts may be
terminated and the company will be unable to enter into future
government contracts. The termination of government contracts could
significantly reduce expected revenue and profits.
Though the company maintained its 2012 earnings guidance and
remains well positioned for growth in its diversified market, the
prevailing uncertain market remains a matter of concern.
Fluor Corporation currently has a Zacks #3 Rank (Hold
recommendation) over the next one-to-three months.
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
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