On Monday (NASDAQ:MNDY), Citi has adjusted its outlook on Fluor Corporation (NYSE:NYSE:FLR) shares, a leading engineering and construction firm, by reducing its price target to $60 from the previous $65. Despite the price target cut, Citi continues to endorse a Buy rating on the company's shares.
The revision comes amidst observations of weaker-than-expected new project awards for the quarter and the anticipation of larger projects concluding in the upcoming quarters, which may warrant a degree of caution. Nevertheless, Citi remains optimistic about Fluor's prospects and potential opportunities, anticipating a possible upturn in project awards in 2025.
Citi highlights strong demand trends in certain end markets, such as Life Sciences and Data Centers, which require power and infrastructure. These sectors are expected to contribute positively to Fluor's business. Moreover, a potentially favorable environment for traditional Oil & Gas projects under the new presidential administration is anticipated to bolster project activities.
Fluor's backlog, which is 80% reimbursable, alongside the company's indication that margins in new awards align with expected segment margins, suggests a promising outlook for margin performance improvement over time. Citi also notes the potential for accelerated capital deployment as a factor that may support Fluor's strong compound annual growth rate (CAGR) expectations for revenue and EBITDA through 2028.
In other recent news, Fluor Corporation reported robust Q3 2024 results despite facing challenges such as Hurricanes Helene and Milton and project cancellations and delays. The company announced a third-quarter revenue of $4.1 billion and new awards totaling $2.7 billion.
Fluor's total backlog reached $31.3 billion, with 80% being reimbursable contracts. The corporation also reported a consolidated segment profit of $117 million and adjusted earnings per share (EPS) of $0.51.
In terms of future plans, Fluor is focusing on growth in non-traditional oil and gas projects and expects strong revenue growth through 2028. The firm also plans to initiate a capital return strategy, including a share repurchase program.
However, it is worth noting that Fluor has lowered its adjusted EBITDA expectations for 2024. These are recent developments and show the company's resilience and strategic approach amid challenging circumstances.
InvestingPro Insights
To complement Citi's analysis, recent data from InvestingPro offers additional perspective on Fluor Corporation's financial position. The company's market capitalization stands at $8.74 billion, with a P/E ratio of 33.94, indicating that investors are willing to pay a premium for Fluor's earnings. This aligns with Citi's optimistic outlook on the company's future prospects.
InvestingPro Tips highlight that Fluor holds more cash than debt on its balance sheet, which could provide financial flexibility as the company navigates the anticipated project completions and potential new awards. Additionally, net income is expected to grow this year, supporting Citi's view on the company's improving performance trajectory.
The company's revenue for the last twelve months reached $15.88 billion, with a modest growth of 3.33%. This growth, albeit small, aligns with Citi's observation of strong demand in certain end markets. However, investors should note that Fluor's gross profit margin is relatively low at 2.72%, which InvestingPro identifies as a weakness.
For those interested in a deeper dive into Fluor's financials and market position, InvestingPro offers 14 additional tips, providing a comprehensive view of the company's strengths and potential challenges in the current market environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.