Positive Indicator for Fluor Corporation's Shares Currently
Fluor's Q2 Results and the Outlook for its Stock
The risk-reward dynamic for Fluor's stock (FLR) presents a favorable picture, albeit with a degree of uncertainty. The company's Q2 earnings report, published at the beginning of August, fell short of expectations, leading to a significant stock sell-off. However, several factors indicate a potentially attractive investment case.
In Q2, Fluor notched $1.8 billion in new bookings, with a substantial 72% being reimbursable. This high proportion of reimbursable bookings reduces execution risk and provides a strong revenue visibility[2][4]. The company's total bookings backlog stands at an impressive $28.2 billion, 80% of which is reimbursable, offering strong protection against headwinds[2][4].
Fluor also holds a majority stake in NuScale Power, giving it strategic exposure to nuclear power development. This positioning is aimed at powering the growing AI data center market, a high-growth sector[2][4]. The stock is valued attractively, with a market cap around $7B-$8.7B and a forward P/E of about 20.7, trading near $41.07. Analyst price targets average $50.57, suggesting a potential upside of 21.7%[1][3].
However, there are potential risks to consider. Macroeconomic uncertainty can impact execution, as reflected in the recent earnings disappointment and high valuation uncertainty noted by Morningstar[2][3]. Stock price volatility is another concern, due to swings in earnings and backlog conversion[2][4].
In summary, Fluor's large reimbursable backlog, nuclear exposure, and discounted valuation relative to growth prospects offer a favorable risk-reward. However, investors should weigh these positives against the high uncertainty and recent earnings challenges before positioning in the stock[1][2][3][4].
It's worth noting that NuScale Power's rise could lead to Fluor's significant exposure to nuclear power being used to power AI data centers, presenting a positive sign for the stock at current pricing levels[5].
As of writing, Fluor's share price is down roughly 23.5% across August's trading. The consensus target for the company's sales for the second quarter was roughly $4.7 billion, and the consensus target for per-share earnings was $0.56. Total bookings saw a drawdown from the $28.7 billion level at the end of the previous quarter[6].
[1] Yahoo Finance - Fluor Corporation (FLR) [2] Fluor Corporation - Q2 2022 Earnings Release [3] Morningstar - Fluor Corporation (FLR) [4] Seeking Alpha - Fluor Corporation (FLR) Q2 2022 Earnings Call Transcript [5] BusinessWire - Fluor Announces Majority Ownership Position in NuScale Power [6] MarketWatch - Fluor Corporation (FLR) Q2 2022 Earnings Call Transcript
Investing in Fluor (FLR) presents a potentially attractive case, considering its large reimbursable backlog, strategic exposure to nuclear power, and discounted valuation. However, investors must weigh these positives against the high uncertainty and recent earnings challenges before investing in the stock.
The company's strong revenue visibility, due to a high proportion of reimbursable bookings, is one factor that makes Fluor an attractive investment opportunity.
