Fluor's Stock Soars 55% in 3 Months: Should You Buy the Surge or Wait?
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This Texas-based engineering, procurement, construction and maintenance services provider's prospects are gaining from the robust demand trends for infrastructure projects for data centers, semiconductors, pharmaceuticals, energy transition, fuel production, and mining and metals. This diversified service offering approach significantly reduces the company's exposure to market uncertainties. Moreover, FLR's balanced capital allocation approach, combined with its refined business strategy, aims to drive shareholder value, boding well for its prospects.Owing to the strong trends for its service offerings in the market, during the past three months, FLR has outshone a few of the other market players, including EMCOR Group, Inc. EME, AECOM ACM and Jacobs Solutions Inc. J. During the said time frame, shares of EMCOR, AECOM and Jacobs Solutions have gained 41.9%, 22.6% and 15.5%, respectively.Although Fluor is thriving in the public infrastructure market, it is being simultaneously pulled back to some extent by the ongoing market uncertainties. The company's prospects are being partially hindered by the risks of project delays, unfavorable currency translation, tariff-related ambiguity, lingering inflationary pressures and global political unrest.
Favorable Market Trends Boosting Backlog: As Fluor operates globally and across diversified market sectors, its backlog trends are favoring its revenue visibility and profitability for the near and long term. The global market is actively shifting its focus to AI alternatives, undergoing a technological revolution, reducing carbon footprint and ensuring sustainability alongside caring about health and wellness. These market trends are, in turn, proving favorable for the company's backlog growth and revenue visibility. Moreover, market players like EMCOR, Jacobs Solutions and AECOM are also benefiting from the increased public infrastructure demand trends.In the first quarter of 2025, Fluor secured consolidated new awards totaling $5.8 billion, with a book-to-burn ratio of 1.5x. This brought its total backlog to $28.7 billion, with 79% classified as reimbursable, mainly including strong contributions from life sciences and infrastructure. The company's strategic approach toward the majority of its backlog being reimbursable reduces the lump-sum risks associated with projects, thus improving its margin expansion trends.Refined Business Strategy: During the first quarter of 2025, Fluor outlined its strategy for the 2025-2028 period, shifting from the "fix and build" phase to "grow and execute". The focus will transition from revitalizing the capital structure to generating cash and earnings. Financial discipline will remain a key priority, with it maintaining its approach to fair contract terms and risk management.Fitting into this strategy puzzle is the company's market diversity approach. FLR's strategy of maintaining a good business portfolio mix permits it to focus on the more stable business markets and capitalize on developing the cyclical markets at suitable times. Moreover, the company's efforts to transform its EPC model into an integrated solution are encouraging. It believes that this will help in expanding its scope of work on a project, improve client satisfaction and provide an opportunity to generate greater returns.Rewarding Shareholders: Fluor is not only undertaking strategies to boost its business growth and increase free cash flow, but is also acting upon its commitment to return capital to shareholders. During the first quarter of 2025, the company repurchased 3,576,745 shares of its common stock for $142 million, with an additional repurchase of approximately 1.5 million shares for $51 million between April 1 and April 25, 2025.Currently, FLR expects to repurchase $150 million worth of its common stock during the second quarter of 2025 and approximately $300 million worth of stock during the latter half of 2025.
The company's current valuation is enticing for investors. FLR stock is currently trading at a discount compared with its industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The discounted valuation indicates an attractive option for investors looking for a suitable entry point.
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That said, in the long term, the valuation could move toward a premium, given the favorable market fundamentals backing the company's revenue visibility.
FLR's earnings estimates for 2025 and 2026 have remained unchanged over the past 60 days at $2.51 and $2.78 per share, respectively. However, the estimated figures for 2025 and 2026 imply year-over-year growth of 8.2% and 10.9%, respectively.
EPS Trend
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The favorable year-over-year comparisons indicate that, despite external risks, FLR will be able to capitalize on its in-house business strategies and ensure incremental prospects.
Project Delays: Fluor is facing minor delays in project execution due to market-driven decisions and ongoing tariff challenges. These factors have added some pressure on timelines, though no widespread slowdown has been observed. Currently, the delay in the Dow's 'Path to Zero' project is concerning for the company's revenue visibility. The client put a pause on the construction activity due to market conditions and pricing concerns.Diversified Risks: The company is exposed to market volatility given its nature of business. Volatility in commodity prices and the cyclical nature of its commodity-based business lines pose significant challenges for Fluor. Moreover, operating in the global market makes the company vulnerable to foreign currency risk, especially when project contract revenues are denominated in a currency different than the contract costs.
Fluor is immensely benefiting from the ongoing robust market trends across several sectors for infrastructure and other related services. The growing project demand for energy transition, fuel production, mining and metals, and data centers is proving favorable for the company's prospects, and given the market's focal shift, the trends are expected to continue in the long term.However, the tailwinds backing FLR are being partially overshadowed by the uncertainties looming over the global market. Project delays, foreign exchange risks, inflation and global political unrest are currently posing threats to the company's growth trends.Thus, by considering both sides of the coin, it will be prudent for existing investors to retain this Zacks Rank #3 (Hold) company's shares for now, whereas new investors might want to wait for a more favorable entry point.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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