Tickers in this Article: FLR, BWC, MDR, URI
Fluor (NYSE:FLR) moved through the recession without incurring too much damage, and recently outlined the company's business and financial goals at an analyst meeting held in August 2010. The company's large addition to its backlog over the last few quarters will also likely lead to earnings growth again. IN PICTURES: How To Make Your First $1 Million

Background
Fluor is an engineering and construction giant with global operations serving many different areas, but with significant exposure to the power, mining and oil and gas industries.

Fluor reported revenues of $5.15 billion in the quarter ending June 30, distributed among its five business segments:

  • Oil and Gas - $1.76 billion
  • Industrial and Infrastructure - $1.82 billion
  • Government - $777 million
  • Global Services - $327 million
  • Power - $469 million.
The company reported earnings of 87 cents per share in the quarter ending June 30. Earnings per share peaked this cycle in 2009 at $3.75 per share, as the global recession forced companies to cut back on some large capital projects. The company is estimating earnings per share for 2010 to be in a range of $2.90 to $3.20.

The total backlog for Fluor was $30.2 billion at the end of the quarter, and the company added $9.3 billion during the second quarter of 2010. Depending on the term of the backlog, such a large add will probably lead to the resumption of earnings growth over the next few years.

The company is virtually debt free with a debt-to-total-capitalization ratio of 3%, and cash and marketable securities of $2.09 billion as of June 30.

Financial Goals
Fluor has established several financial goals as it navigates the emerging recovery in the economy. These include maintaining a long-term growth rate between 10% and 15%, and a return on capital employed above 15%. The company also seeks to keep its debt to total capitalization below 30% and maintaining its A credit rating by the ratings agencies. (To learn more, see What Is A Corporate Credit Rating?)

Fluor's most recent contract win was in the government sector, and was awarded by the U.S. Department of Energy (DOE) to help clean up the Portsmouth Gaseous Diffusion Plant located in Ohio. The contract is for $2.1 billion over 10 years, and involves the cleanup of uranium at the site, which was used by the government for nearly 50 years. Babcock & Wilcox (NYSE:BWC), a company recently spun out by McDermott International (NYSE:MDR), is also part of the group awarded the contract.

Fluor is involved in several partnerships when seeking out business. The company just entered into a joint venture with United Rentals (NYSE:URI) to offer services to oil and gas companies in the Gulf Coast.

Bottom Line
Fluor suffered an earnings decline during the recession but made it through in good shape due in part to its large backlog and low leverage. Earnings growth will most likely resume over the next few years as recent contract wins move through the pipeline.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center