Fluor operates within three business segments: Urban, Mission, and Energy Solutions:
Urban Solutions has maintained strong momentum into 2024, driven by high-demand sectors like tech, life sciences, mining, and infrastructure. In Q2 2024, it posted a $105 million profit, propelled by new awards totaling $2.4 billion, boosting the backlog to $19.6 billion—a significant 70% year-over-year growth. Key wins include a $1.1 billion aluminum facility contract in Alabama and initiatives in rare earth refining and lithium projects. The 2023 revenue growth was fueled by life sciences and semiconductor projects, as well as favorable outcomes from past claims, like an international bridge settlement. The segment faced a minor Q4 2023 setback due to rework on legacy infrastructure projects. Looking ahead, anticipated interest rate cuts could support demand for sustainable urban development, pushing new awards further in 2024.
Mission Solutions focuses on nuclear operations, waste management, and national security projects. In Q2 2024, it delivered a $41 million profit and $63 million in new awards, though its backlog fell from $4.9 billion to $3.8 billion as projects like the F.E. Warren initiative concluded. Notable developments included a two-year extension for the Paducah contract and new awards at Pantex and Air Force sites. In 2023, revenues rose due to projects with the Department of Energy, defense, and FEMA, although a $30 million charge from delays at a weapons facility impacted profits. The absence of significant 2022-level awards, like the Savannah River Site extension, led to fewer new awards in 2023 and a reduced backlog. Nonetheless, the segment appears well-positioned to capture more defense and disaster recovery contracts if government spending increases in 2024.
Energy Solutions leads in clean energy projects, generating a $75 million profit and $582 million in new contracts in Q2 2024. Major wins included a petrochemical facility in Canada and a design contract for RoPower’s small modular reactor in Romania. The segment advanced its LNG Canada project and pre-FEED work for refining and battery projects. Revenue grew in 2023 thanks to refineries, chemicals, and LNG projects, though legacy cost increases and schedule delays were headwinds. Q4 2023 saw a dip in profits as a major upstream project neared completion. With global energy investments expected to rise alongside interest rate cuts, Energy Solutions is poised for further contracts in decarbonization, hydrogen, and other low-carbon technologies in 2024.
Fluor’s recent $1.4 billion contract modification for US naval nuclear propulsion work, announced in August, is a notable boost, extending work across Pittsburgh, Schenectady, and Idaho Falls. It reinforces Its strength in defense-related projects and ability to secure significant government contracts. In July, the group won a design and engineering contract for a modular reactor in Romania with RoPower Nuclear, aligning with Romania’s clean energy goals. Although the contract’s value wasn’t disclosed, the reactor’s 462 MW capacity suggests it could be worth up to $3 billion, highlighting Fluor’s growing role in the nuclear energy sector. In June, it secured a joint venture contract with BWXT and Texas A&M University to manage the Pantex Plant for the DOE’s National Nuclear Security Administration—a potential $30 billion deal over 20 years, underscoring its expertise in managing complex, long-term projects.
LNG Canada Export Facility
Fluor operates in a fiercely competitive market, facing rivals like AECOM, Bechtel, Jacobs, KBR, and SNC-Lavalin, among others. Success in sectors like Energy and Urban Solutions hinges on executing complex projects safely, on time, and within budget. Fluor’s global reach, diverse expertise, strong safety record, and cost-effectiveness are critical strengths. In Mission Solutions, competition is driven by performance and compliance, while the staffing segment contends with over 1,000 firms, emphasizing service quality and talent acquisition.
Fluor's financial performance has been mixed since 2014. Revenues fell from $21.5 billion to $15.4 billion by 2023, though they are expected to recover to $17 billion in 2024 and $20.3 billion by 2026. EBITDA dropped sharply from $1.4 billion to $281 million between 2014 and 2018 but is forecasted to rise to $848 million by 2026. Net income followed a similar trajectory, decreasing from $510 million to $83 million, with a projected rebound to $624 million by 2026. After significant financial challenges through 2021, there’s now positive momentum, reflected in a rising P/E ratio: from 47.5x in 2022 to 72.5x in 2023, with more reasonable projections of 18.7x in 2024 and 14.7x in 2026. CapEx also increased from $75 million in 2022 to a projected $155 million in 2024, indicating investment in growth.
In terms of profitability, ROA fell to 1.2% in 2023 from 8.66% a decade earlier, but is expected to improve to 7.1% by 2026. Meanwhile, ROE rose from 20.84% to 25.34% over the same period, though it may decline to 18.9% by 2026.
A potential slowdown in demand for Fluor's core EPCM services, a drop in government spending, or economic uncertainty could all impact contract flow and margins. Its reliance on securing new contracts is a significant risk factor, as its revenue stream depends on clients' budgets and willingness to invest in large-scale developments. Yet, with interest rates dropping, spending on large projects could rise, benefiting the group. Recent wins in energy, infrastructure, and defense reflect strong momentum into 2025, driven by demand for high-margin services and sustainable solutions. New contracts will be the clearest indicator of company’s growth ahead. Given favorable macroeconomic trends, Fluor is positioned to capitalize on these opportunities.