Company Spotlight - Fluor Corp. (FLR) Riding Oil Prices | | NYSE: FLR $141 | The Good: Oil prices are strong, creating more demand for services.
The Bad: High valuation with a P/E of 28 and Price to Book of 6.5.
The Beautiful: Record backlog almost guarantees good earnings growth. | P/E: 28.0 | PSR: 1.1 | ROE: 18% | Debt/Eq: 0.14 | DIV. YIELD: 0.5% |
January 11, 2008 - Fluor Corp. (FLR-NYSE) ranks among the leading international design, engineering, and contracting firms. The company oversees construction projects for a large range of industrial sectors worldwide, focusing on its core strengths: engineering, procurement, construction, and maintenance. Its projects include designing and building manufacturing facilities, refineries, pharmaceutical facilities, healthcare buildings, power plants, and telecommunications and transportation infrastructure. Fluor also provides operations and maintenance services for its projects, as well as administrative and support services to the US government. Since 2002, FLR has been going up most of the time. It's now trading off its all-time high of $172.15 set on October 26 of last year by about 20%. It might be worth your time to look into this earnings power house.
Earnings grew annually 12.5% on average over the last 5 years, going from $2.13 in 2002 to an estimated $4.15 for 2007. Analysts predict $5.15 for 2008. Over the next 5 years, earnings per share are forecasted to increase at an annual rate of 21% while revenues climb by 14% a year, on average, in the same time period. For the fourth quarter, analysts think earnings improved by 27% to $1.14 while the year's total was up 40% over 2006.Growth is being fueled by every segment of the business but especially the company's oil & gas, power and global services divisions. In the third quarter of 2007, the company booked $6 billion of new business. Overall backlog at the end of that quarter stood at $27.9 billion, a company record and 41% above the same quarter's backlog of 2006. The company had revenues of $16.4 billion in 2007, almost 2 years worth of sales. That gives investors more confidence in projected earnings as business is already booked. With oil prices near $100, demand for Fluor's oil & gas services should increase significantly. Energy companies have lots of cash and will want to upgrade their existing facilities for better efficiencies and higher output. Some numbers: Current assets are 1.4 times current liabilities with $1.5 billion in cash. There's a dividend of 80 cents a share which takes about 16% of earnings to pay. Return on Equity is 18%. Net profit margin is 2.3%. Book Value for the stock is $23.30. The P/E is 28. Price to sales is .8. Fluor was selling for $20 a share in 2002. Since then the stock has enjoyed strong investor favor. With a record backlog and higher oil prices, earnings should continue to improve. But does that justify the rather high P/E ratio? And what if oil prices head down? Some things to consider when investigating this solid stock. - Company Web site: http://www.fluor.com/ - Ted Allrich |
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