Citi Upgrades Fluor (FLR) to Buy

Citi analyst Andrew Kaplowitz upgraded Fluor (NYSE: FLR) from Neutral to Buy with a price target of $65.00 (from $52.00).

The analyst comments "FLR – we upgraded FLR and raised our price target to $65 based on 19x our new 2026 EPS estimate of $3.40 (was $52 based on 13x our 2025 estimate of $3.45). Ultimately, we think FLR’s outlook/execution continues to evolve positively, and while we think improvement has been and will continue to be somewhat slow, we can’t ignore FLR’s increased backlog over the last several quarters (up mid 20% y/y as of 2Q24) nor its improved overall execution (for instance, FLR has reduced its legacy cash drag by more than $200mn in 2024). Our upgrade of FLR is mostly focused on the longer term though – we think FLR’s book to bill for the next few quarters could be less than 1x, which historically wouldn’t bode well for the stock (there historically has been a high correlation between FLR’s backlog movements and FLR’s stock price). We think FLR’s book/bill should pick back up over 1x likely toward the middle of 2025, and in the meantime given FLR’s improved execution and relative valuation discount vs. the S&P (trading at 0.80x vs. 1.08x), which doesn’t take into account that we think FLR could monetize at least several hundred million dollars from its ~50% equity stake in SMR, we think FLR’s stock could still act reasonably well. As for 3Q, besides a relatively quiet quarter on the bookings front, we generally expect a solid quarter on the earnings front, although we can’t rule out continued modest “noise” on fixed price work. We should mention that we think FLR Management will continue to be positive regarding a reacceleration of bookings at some point in 2025 given good visibility toward future work in Life Sciences, Mining, and in Data Centers. Moreover, with the recent approval of the Hanford Tank Waste Operations and Closure, LLC contract, FLR continues to add to over $5bn of additional project scope that is not reflected in FLR’s revenue."

For an analyst ratings summary and ratings history on Fluor click here. For more ratings news on Fluor click here.

Shares of Fluor closed at $53.86 yesterday.

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