Engineering and construction company Fluor (FLR 8.40%) easily beat quarterly expectations, and the company is optimistic about what the future holds. Investors are rallying into the shares, sending the stock up about 10% as of 11:00 Eastern on Friday.
Fluor has a strong foundation to build on
Fluor is one of the world’s largest construction and engineering companies, with an emphasis on large energy projects, infrastructure, and environmental remediation. The company earned $1.02 per share in the third quarter on revenue of $3.96 billion, easily surpassing Wall Street expectations for $0.56 per share in earnings on sales of $3.89 billion.
The beat was driven by efficiency and is a tangible result of Fluor’s recent streamlining campaign.
“This quarter’s results reflect our deliberate focus on driving profitability through improved project execution and our high-quality contract backlog,” CEO David E. Constable said. “Combined with our strengthened and simplified capital structure, Fluor is well positioned to support demand-driven growth and improved shareholder returns.”
Fluor also raised its full-year 2023 earnings guidance to $2.50 to $2.70 per share from $2 to $2.30 per share. Wall Street was expecting $2.15 per share in full-year earnings.
If Fluor a buy after its big earnings beat?
There is a lot of global demand for Fluor’s services. The question is how quickly that demand can turn into actual revenue-generating projects. Shares of Fluor have been weak of late on investor fears that projects might get delayed due to economic uncertainty.
But as Constable notes, Fluor has focused on more reliable projects and has built a backlog of future business that the company believes it can bank on.
Fluor’s backlog at the end of the quarter was 70% reimbursable, up from 58% a year ago. That predictability allows the company to make long-range projections. Looking out to 2026, Fluor believes it can generate earnings in the $3.10-to-$3.60 range.
This is a highly cyclical business, and after climbing nearly 200% over the past three years, Fluor shares are not inexpensive. But this is a company with a solid track record and a clear path for growth from here. Investors looking for ballast in their portfolio should find Fluor intriguing.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.