Monday, Fluor Corporation (NYSE:FLR) received a vote of confidence from Baird, as the firm raised its price target on the stock to $46.00, up from the previous $42.00, while maintaining an Outperform rating.
The upgrade follows Fluor's first-quarter performance, which saw contract awards surpassing expectations and a significant increase in the company's backlog, with 80% now being reimbursable contracts. This shift indicates a decrease in Fluor's risk profile.
The company's management has responded to the robust quarter by materially raising their free cash flow (FCF) guidance, although they have decided to keep their earnings guidance unchanged. Despite a $29 million charge associated with a fixed-price energy project, which was noted as a negative aspect, the overall impact is considered manageable. Baird highlighted that no additional charges were reported on legacy jobs that previously raised concerns.
Baird's analyst pointed out that while earnings expectations for Fluor have increased significantly, the market still appears to undervalue the company, potentially due to its historical challenges. The firm suggests that the market's perception of "new Fluor," which is now seen as having a lower risk profile and improved financial outlook, does not fully reflect the company's current position and future potential.
In summary, Baird's adjustment of Fluor's price target reflects a positive outlook on the company's recent performance and prospects. The analyst's comments underscore the belief that, although Fluor has faced difficulties in the past, its current trajectory provides an attractive opportunity for investors.
InvestingPro Insights
Following Baird's optimistic assessment of Fluor Corporation (NYSE:FLR), InvestingPro data further contextualizes the company's financial health and market performance. With a market capitalization of $6.62B, Fluor shows stability in its valuation. The company's P/E ratio stands at 24.25, suggesting a market expectation of growth relative to earnings. Additionally, the last twelve months as of Q1 2024 have seen a revenue increase of 7.53%, indicating a positive trajectory in Fluor's business operations.
Investors may also find encouragement in the InvestingPro Tips, which highlight that Fluor holds more cash than debt on its balance sheet and is expected to see net income growth this year. These factors, combined with the company's position as a prominent player in the Construction & Engineering industry and the prediction of profitability within the year, could underpin the raised price target. However, it's worth noting that the company does not pay a dividend, which might be a consideration for income-focused investors.
For those looking for more comprehensive analysis, InvestingPro offers additional insights, with 8 more tips available for Fluor Corporation, which could be instrumental in making informed investment decisions. To access these insights and more, utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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