Morningstar | FLR Updated Forecasts and Estimates from 11 Oct 2018
We are trimming our fair value estimate for narrow-moat Fluor to $50 from $52 per share after the global engineering and construction firm warned that third-quarter revenue and earnings will miss analyst expectations. We adjusted our near-term projections for the top and bottom line in our valuation model, setting future revenue a bit lower than in our previous model. Shares plummeted after the announcement of preliminary third-quarter results, which included lower revenue projections as well as $81 million in pretax charges for two projects in Citrus County, Florida, and Europe.Our prior fair value estimate already reflected conservative revenue growth assumptions for the next two years. As such, while the preliminary third-quarter earnings release announcement is disappointing, it does not materially alter our long-term view of the company. We expect Fluor will continue to benefit from the upswing in capital spending, as evidenced by the company’s growing backlog, as well as from U.S. tax and regulatory reforms.
Fluor is a holding company. Through its subsidiaries, the company provides engineering, procurement, construction, fabrication and modularization, operations, maintenance and asset integrity, as well as project management services. The company serves a set of industries including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and manufacturing. The company is also a service provider to the U.S. federal government and governments abroad; and it performs operations, maintenance and asset integrity activities for industrial clients. The company has four segments: Energy & Chemicals; Mining, Industrial, Infrastructure & Power; Diversified Services; and Government.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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