Fluor overcame some formidable challenges over the past six years.
It’s in much better shape today, and its stock looks reasonably valued.
Fluor (NYSE: FLR), one of the world's largest engineering and construction firms, has overcome many challenges over the past five years. In 2020 and 2021, it experienced severe delays, cost overruns, and execution issues during the pandemic. It stabilized its business over the following two years by shifting from fixed-price megaprojects to reimbursable ones and phasing out its riskier lump-sum projects. Still, new execution issues and macro headwinds throttled its growth.
Fluor is still considered a stable blue chip stock, and its shares have risen about 4% over the past 12 months. Those returns aren't too impressive, but will it climb higher over the next year?
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More than 80% of Fluor's backlog now consists of reimbursable contracts rather than fixed-price ones, and it expects that percentage to keep rising. The secular growth of the cloud, AI, industrial, and nuclear markets should also generate more tailwinds for its business.
Fluor also recently liquidated its remaining stake in NuScale (NYSE: SMR), a developer of small modular reactors (SMRs), generating an estimated raw profit of $1.86 billion. As a more streamlined business, Fluor should generate more stable growth over the next few years.
Analysts expect Fluor's adjusted EPS to rise 18% in 2026 and 28% in 2027 as those tailwinds kick in. If it meets those expectations and still trades at 21 times its current-year earnings, its stock could potentially rise about 28% over the next 12 months.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.