Fluor Enjoys Renaissance as It Tackles Wide Variety of Projects Around World
Fluor Corp., the once-distressed engineering and construction firm, is enjoying a renaissance in 1988 as it tackles projects ranging from subways in New York to copper mines in Chili.
Once almost exclusively involved in giant oil-industry construction projects, primarily in the Middle East, Fluor has undergone a major retooling.
The Irvine-based company now builds and designs hotels, jails, chemical plants and transportation systems, as well as its traditional oil and gas projects.
So far this year, Fluor has attracted about $1 billion more in new orders than it did a year ago. Its stock price has moved higher as a result, and some analysts believe that it will continue to appreciate as new business rolls in.
‘Sun Is Shining’ on Fluor
“Fluor stock is being driven by new-order momentum, not earnings,” said Terence York, a securities analyst with Drexel Burnham Lambert Inc., New York. “It will probably take a breather near term, but over the longer perspective, the stock should move higher. Finally, the sun is shining on their parade.”
Fluor stock began 1988 at about $15 a share and reached a high for the year of $23.25 in July before backing off slightly. Fluor closed Friday at $21 a share.
After trading as high as $71 a share in the early 1980s, Fluor stock plunged to $11 in 1985 and again in 1987.
The company’s backlog of uncompleted orders stands at $5.5 billion, up from $4.4 billion a year ago. By the end of 1989, orders should be up to $7 billion, York said.
For Fluor, the backlog is a key indicator of future earnings because of the long lag, typically about a year and a half, from the time an order is placed to its completion.
Three Profitable Quarters
After two years of heavy losses, Fluor has reported profits for three consecutive quarters. For the second quarter, the company earned $10.3 million on revenue of $1.1 billion.
York predicted that the company will earn $15 million for the third quarter. For the year, he said he expects earnings of $40 million to $50 million on sales of $4.3 billion.
According to Andrew Silver, a securities analyst with Odyssey Partners, a New York investment firm, Fluor stock appears fairly valued today and is unlikely to go much higher for the remainder of the year.
To some extent, Fluor is riding a wave of renewed activity in industrial engineering. After years of underinvesting, companies in paper, chemical and other heavy industries are rebuilding and modernizing their factories.
The cheaper dollar has pushed up the pace of plant rebuilding as exporting increases.
Fluor has been pursuing a diversification program that has allowed it to capitalize on all that activity, according to analysts.
‘Broader and Deeper’
“A lot has been made over the fact that Fluor’s restructuring has left the company leaner and meaner. I think the real point is that Fluor today is broader and deeper,” York said.
Fluor has contracts to rebuild subways in New York, build radar stations for the National Weather Service and expand production facilities for Chrysler, all of which involve areas that are relatively new for Fluor.
A few years ago, 60% of Fluor’s income came from work related to the oil and gas industry. That portion has since fallen to only 22%.
