Fluor Stock Rises on News of Contract Award : Deal: Investors react to engineering subsidiary’s being given the job of cleaning up a closed uranium fuel plant.
Tuesday would have been a serendipitous day to invest in Fluor Corp. stock.
Just a few hours before the Irvine-based engineering giant announced that it had won the largest environmental cleanup contract ever--possibly worth $4 billion--Fluor’s stock closed at $38 a share. It was down 62.5 cents a share from Monday’s close on the New York Stock Exchange.
After its late-afternoon announcement on Tuesday, however, Fluor stock jumped $1.50 to $39.50 a share on Wednesday.
The U.S. Department of Energy awarded Fluor’s main subsidiary, Fluor Daniel Inc., and a team of subcontractors the much-sought-after job of mopping up a closed uranium fuel plant in Fernald, Ohio. The initial five-year, $2.2-billion contract includes an option for three more years of work worth another $1.8 billion.
Analysts said Wednesday that while the contract obviously will increase Fluor’s profitability, its long-term effect on Wall Street will be less dramatic than the immediate enthusiasm might indicate.
“It could add a nickel or a dime to the stock” price, said Byron K. Callan, an analyst with Prudential Securities Research. “From a financial standpoint, it doesn’t change my earnings expectations for the company.”
Nor is Mark Altman, a PaineWebber Inc. analyst, rethinking his earnings forecast for Fluor. “We already had assumed in our estimate that some of these big projects would come their way,” he said.
However, the analysts agreed that the record-breaking contract will raise Fluor’s esteem as an environmental project manager. “It demonstrates that the company’s skills are applicable over many different markets,” Altman said.
But the contract won’t make Fluor a shoo-in for the government’s next big cleanup assignment, Callan said.
“There is a resource problem when it comes to the number of people at a company available to manage these gigantic and complex projects,” he said. “It’s not as if there is a surplus of environmental engineers these days, so I doubt that any one company will be able to corral the market in this area.”
As it was basking in the excitement over its government contract Wednesday, Fluor announced more good news--if somewhat less grand in magnitude: Another subsidiary, A.T. Massey Coal Co. Inc., had purchased 60,000 acres of land in southern West Virginia estimated to contain more than 164 million tons of high-quality coal. Pennsylvania-based Bethlehem Steel Corp. sold the property and mineral rights for an undisclosed amount.
