EUR 850.00 For Business Accounts Only

Morningstar | Fluor Delivers Solid 4Q Results; Maintaining FVE

Narrow-moat Fluor is one of a handful of global engineering and construction, or E&C, firms that specialize in larger and more-complex construction and development projects for major industrials, miners, utilities, and government entities.Fluor targets multibillion-dollar projects where competition is inherently more limited. Competitive strengths include its lengthy track record, vertical integration, diversified project mix, sophisticated support services, and financial strength. Vertical integration means it performs services from pre-construction feasibility studies and front-end engineering and design work to detailed engineering, procurement, construction and project management, as well as post-construction commissioning, operations, and maintenance.Awards for early-stage work help Fluor establish client relationships, provide insight into a project's risks and opportunities, and allow it to assess profit potential. 2015-17 were years of declining organic revenue and operating income driven by weaker commodity prices and delays on major projects. Order backlog ebbed amid mixed economic signals and political uncertainty. Fluor's project portfolio is diversified across geography and industry. Its $31 billion backlog includes ethylene crackers at the heart of the U.S. petrochemical renaissance, the single-largest global petrochemical complex (Sadara joint venture in Saudi Arabia), as well as the largest single support services contract for the U.S. military (LOGCAP IV in Afghanistan). High-visibility projects in turn tend to attract motivated project managers and a preferred group of technology providers, subcontractors, and suppliers with whom to collaborate. One example is Fluor's partnership with ethylene technology provider TechnipFMC to secure lead roles in three recent multibillion-dollar ethylene cracker projects in the U.S. Gulf.Commodity and energy prices have strengthened in 2018, and U.S. tax and regulatory reforms have brightened the outlook for cyclical recovery in project demand. We look for Fluor to exploit opportunities across the energy chain, petrochemicals, LNG, and other healthy niches to recharge growth and profitability.