On Monday, BofA Securities updated its outlook on Fluor Corporation (NYSE:FLR), a global engineering and construction firm, by increasing the stock's price target to $42.50, up from the previous $41.50. Despite the adjustment, the firm has maintained its Neutral rating on the company's shares.
Fluor's shares experienced a 6% decline last week, underperforming the S&P 500 which saw a 1% increase. This drop came after the company reported first-quarter adjusted EBITDA of $88 million, marking a 24% increase year-over-year, yet falling short of the consensus estimate by a significant $35 million. Additionally, adjusted earnings per share (EPS) were reported at $0.47, which was below the anticipated $0.57.
The company's Energy Solutions segment faced challenges, including delays and cost escalations related to labor and materials. These issues led to a $29 million charge on a subcontract with a joint venture in Mexico.
Despite these setbacks, BofA Securities noted some positive aspects in Fluor's report. The firm highlighted that Fluor has maintained its full-year guidance, with projected EBITDA between $600 million and $700 million and adjusted EPS in the range of $2.50 to $3.00.
The company also reported strong bookings, a rising mix of reimbursable contracts, and positive cash flow, which could be seen as encouraging signs for the future.
InvestingPro Insights
Fluor Corporation's (NYSE:FLR) recent performance and BofA Securities' updated outlook align with several key metrics and insights from InvestingPro. The company's robust market capitalization of $6.62 billion underscores its significant presence in the industry. Despite a challenging quarter, Fluor's price-to-earnings (P/E) ratio stands at 24.25, reflecting investor expectations of future earnings growth. This is further supported by a PEG ratio of 0.05, suggesting that the stock may be undervalued relative to its earnings growth potential.
From an operational standpoint, Fluor's gross profit margin over the last twelve months as of Q1 2024 is relatively low at 3.97%, which aligns with the InvestingPro Tip highlighting the company's weak gross profit margins. However, the company's liquidity position is strong, with liquid assets exceeding short-term obligations, and it holds more cash than debt on its balance sheet, providing financial stability.
Investors looking to delve deeper into Fluor's prospects can explore additional InvestingPro Tips. There are 9 more tips available, including expectations of net income growth this year and an analysis of stock price volatility. For a more comprehensive understanding of Fluor's potential, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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