Fluor Corp (NEW) (FLR)

The engineering and construction companies had a great year in 2007. Their current environment is like that of the deep offshore drillers. They have large backlogs of work, and an environment that is very bullish for their businesses. FLR is the largest of these companies, and arguably the best. 101 days ago, I placed a buy recommendation on theupdown.com, and it is up 45.20% within that time frame. The world is currently a bullish venue for infrastructure and energy, and FLR is better positioned to take care of the world’s needs based on their size and specialization. Revenue for 2007 was $16.7 billion and at the end of the first quarter they had $31.5 billion in backlog.





Engineering and construction companies have good transparency with respect to forward growth. Not only do they have transparency, but they are also the center of a worldwide build to allow for the growth of many emerging economies. They have good diversity with respect to their business, as FLR received 54% of their revenue from oil and gas in the first quarter. Infrastructure was 16% of their business, global services was 15%, power was 9%, and government was 6%. With respect to their backlog, 65% is oil and gas, 18% infrastructure, 8% global services, 7% power and 2% government. FLR’s growth going forward will be bolstered by an oil and gas market that is the top of everyone’s agenda. They are currently working closely with the Middle East to pick up oil production. Refineries need to be upgraded in the US, North American power plants need to be built, and nuclear work in Russia, and the US.





Since the second quarter of 2006, new contracts have been steady with respect to each subsequent quarter. The awards have fallen between $4.5 billion and $6.3 billion. Over that same period backlog has increased every quarter, from $18 billion to $31.5 billion. Of the backlog, 46% is in the US, 40% is in Europe, Africa and the Middle East, 9% Asia, and 5% Americas. Revenues were up for the first quarter year over year by 32%. Operating profit was up 40%. Net earnings were up 63%. EPS was up 60%. New contracts were up 28% and backlog increased 33%. Their cash, dividend and return on capital all saw significant increases. Debt to total capital decreased from 25% to 12%. EPS has increased every year from 2004 and estimates for this year have the company showing very good growth.





Analysts have the company’s earnings growing 46.8% this year. Next year, they are projecting growth at 19.7%. They have beat earnings for three out of the last four quarters. I think these estimates a very low based on the power needs for the world going forward. Not only is oil going up significantly, so is natural gas and coal. This shows the need. As these needs continue to increase, E and C will do very well. I think this will be another excellent year for FLR. Current trends have this stock going to $250. Look for a stock split in the near future.