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Credit Suisse Expects Fluor Corporation Will Be Boosted By Energy Sector Spending

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Credit Suisse Expects Fluor Corporation Will Be Boosted By Energy Sector Spending
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Fluor Corporation (NYSE: FLR) has signed a contract with Royal Dutch Shell plc (ADR) (NYSE: RDS.A) for the engineering, procurement and fabrication of its Penguins floating production storage and offloading vessel in the North Sea.

The Analyst

Credit Suisse's Jamie Cook upgraded Fluor Corporation from Neutral to Market Perform and increased the price target from $43 to $71.

The Thesis

The engineering an construction sector has significantly underperformed the industrials and the market, but with the improvement in fundamentals, it is becoming more attractive and investors will gravitate back, Cook said. (See the analyst's track record here.) 

"We believe FLR will be the go-to name, viewed as a higher-quality bellwether with a diverse end market offering, and more importantly a more cyclical growth bias," the analyst said. 

Fluor is already benefiting from improvement in commodity CapEx, as it is competitively best-positioned in the sector, Cook said. 

Credit Suisse expects that the energy CapEx from integrated and national oil companies will further boost Fluor's backlog.

In 2018, EPS will improve due to the absence of problem projects and lower taxes, the analyst said.

"Furthermore, backlog appears near [the] bottom and is inflecting positively in the [second half of 2018], which is the biggest driver of stock performance," Cook said. 

The Price Action

Fluor Corporation gained around 17 percent in 2018 and was up 3.58 percent late in Thursday's trading session. 

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Latest Ratings for FLR

DateFirmActionFromTo
Dec 2018Goldman SachsDowngradesConviction BuyBuy
Nov 2018Deutsche BankMaintainsHoldHold
Nov 2018BairdMaintainsNeutralNeutral

View More Analyst Ratings for FLR
View the Latest Analyst Ratings

Posted-In: Credit Suisse energy Jamie CookAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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