One of the great infrastructure plays now appears to be on sale. Fluor Corporation (NEW) (NYSE:FLR)’s stock has been pushed down over 6.5% during the past week, and despite the rebound in the U.S. economy, Fluor (NYSE:FLR) is still grossly under-performing the S&P 500.
Things should change going forward. In what appears to be a robustly competitive engineering and construction market, Fluor Corporation (NEW) (NYSE:FLR) is the market leader, with nearly three times the revenue of any major peer.
The diversity
Fluor has five key segments that give it impressive revenue diversity and market reach. Its top segment is oil and gas, where it offers a range of design, engineering and construction services for upstream and downstream oil and gas production markets.
Its other key market includes the industrial and infrastructure segment, which offers engineering and construction services for new construction and refurbishment markets.
The government-group segment provides engineering and construction operations to the U.S. government, focusing on the Department of Energy, the Department of Homeland Security and the Department of Defense.
The global services segment integrates a variety of customized service capabilities that assist industrial clients in improving the performance of their plants and facilities. This overall diversity helps Fluor Corporation (NEW) (NYSE:FLR) achieve consistent results and generate solid cash flow.
Robust growth
Some key highlights of late for Fluor Corporation (NEW) (NYSE:FLR) include its robust backlog and recent awards. New awards were up to $27.1 billion in 2012 from the $26.9 billion in 2011, with its backlog coming in at $38 billion for the end of 2012. In May, Fluor was awarded a contract by Dow Chemical for engineering and constructing a propane dehydrogenation unit and ethane cracker. What’s more is that over 50% of Fluor Corporation (NEW) (NYSE:FLR)’s backlog is in the robust oil and gas industry.
One of Fluor’s favorite peers is Jacobs Engineering Group Inc (NYSE:JEC). Jacobs offers engineering and construction services. Jacobs posted fiscal 2Q EPS of $0.80 compared to $0.65 for the same quarter last year. Results were below the $0.82 consensus. Backlog was up some 11% last quarter year-over-year, and revenue is expected to be up in the high single digits for 2012.
However, there will be headwinds related to weakness in Jacobs Engineering Group Inc (NYSE:JEC)’ metals and mining segment due to soft demand in China and Australia. The balance sheet, however, appears to be somewhat solid, with cash of $1.1 billion compared to debt of $450 million. Much like Fluor Corporation (NEW) (NYSE:FLR), Jacobs should manage to perform fairly well with the tailwinds in the oil and gas infrastructure sector.
