Fluor (FLR) Completes Puerto Rico's High Priority Power Line
Fluor Corporation FLR recently announced the completion of a high priority 38kv power line close to San Juan. The company was working under a contract with the U.S. Army Corps of Engineers (“USACE”). The high priority power line will enable Puerto Rico Electric Power Authority to re-energize lines, serving an area of Carolina that consists of a hospital as well as residential neighborhoods.
The contract called for power grid restoration and repair & replacement of structures and equipment supporting the re-energization. It also involved recommissioning of electrical infrastructure in eastern Puerto Rico.
Existing Business Scenario
Fluor has a solid track record of receiving awards. Management remains optimistic about continuation of this trend in the future as well, which is expected to drive growth. The company has strong long-term prospects in fields like in renewable energy, gas-fired combined cycle generation and air emissions compliance projects.
Based on the present trends, Fluor remains confident that it will secure two major EPC mining projects in the next few quarters. The company’s healthy level of backlog in infrastructure, government, life sciences and advanced manufacturing has allowed it to offset multiyear declines in mining, metals, and oil & gas markets.
Fluor has returned 25.4% in the past three months, outperforming the industry’s gain of 16.6%.
Despite such impressive growth drivers, volatility in commodity prices, and the cyclical nature of the company’s commodity-based business lines, poses significant challenges in the coming quarters. Going forward, the company believes that clients of Energy, Chemicals and Mining segment will maintain a cautious approach while taking investment decisions which will add to the woes.
Further, the company’s margins are under pressure as it is transitioning from higher margin engineering to lower margin construction activities, particularly related to Energy & Chemicals and Mining segment. This apart, sluggish economic growth worldwide and softness in key geographic regions also pose challenges. These conditions are hurting the company’s non-oil and gas end markets as well.
Nevertheless, we believe the Zacks Rank #3 (Hold) company’s streamlined business structure, and gradual improvement in energy and mining sectors will offer growth opportunities going forward.
Stocks to Consider
Some better-ranked stocks from the same space include Boise Cascade, L.L.C. BCC, Jacobs Engineering Group Inc. JEC and Willdan Group, Inc. WLDN. While Boise Cascade sports a Zacks Rank #1 (Strong Buy), Jacobs Engineering Group and Willdan Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boise Cascade has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 116.3%.
Jacobs Engineering Group has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 4.8%.
Willdan Group has outpaced estimates in the preceding four quarters, with an average earnings surprise of 44.8%.
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