FLR - Valens Credit Report - 2023 06 27
Cash bond markets are slightly overstating FLR's credit risk with a YTW of 6.106% relative to an Intrinsic YTW of 5.514%. Furthermore, Moody's is overstating FLR's fundamental credit risk with its speculative Ba1 credit rating three notches below Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. As a positive, management's compensation metrics should focus them 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 2023 earnings call (5/5) highlights that management generated an excitement marker when saying they'll continue to generate cash flow that can help pay off debt. Additionally, management is confident their projects are improving the lives of oncology patients, they'll find strategic investors for NuScale by the end of the year, and that legacy projects will have similar cash needs in 2024.
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- 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
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- 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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