FLR - Valens Credit Report - 2022 08 01
Cash bond markets are materially overstating FLR's credit risk with a YTW of 6.596% relative to an Intrinsic YTW of 4.931%, while CDS markets are overstating FLR's credit risk with a CDS of 298bps relative to an Intrinsic CDS of 188bps. Furthermore, Moody's is overstating FLR's fundamental credit risk with its Ba1 credit rating three notches below Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Management's compensation metrics should focus management on all three value drivers; margin expansion, asset efficiency, and revenue growth, which should lead to higher Uniform ROA and more cash flow available to service debt obligations
Earnings Call Forensics™ of the firm's Q1 2022 earnings call (5/6) highlights that management is confident they can improve their book to burn ratio above 1.0, that they are entering contracts that protect their business, and that their margins were extremely strong.
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.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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