Have you been paying attention to shares of Fluor (FLR)? Shares have been on the move with the stock up 41.1% over the past month. The stock hit a new 52-week high of $29.9 in the previous session. Fluor has gained 20.1% since the start of the year compared to the -15.6% move for the Zacks Construction sector and the 5.8% return for the Zacks Engineering - R and D Services industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 22, 2022, Fluor reported EPS of $0.31 versus consensus estimate of $0.28 while it missed the consensus revenue estimate by 3.1%.
For the current fiscal year, Fluor is expected to post earnings of $1.34 per share on $13.68 billion in revenues. This represents a 42.55% change in EPS on a 9.99% change in revenues. For the next fiscal year, the company is expected to earn $1.79 per share on $14.64 billion in revenues. This represents a year-over-year change of 33.58% and 7.04%, respectively.
Fluor may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Fluor has a Value Score of D. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 22.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 20.8X. On a trailing cash flow basis, the stock currently trades at 16.9X versus its peer group's average of 13.9X. Additionally, the stock has a PEG ratio of 0.66. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Fluor currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Fluor meets the list of requirements. Thus, it seems as though Fluor shares could have a bit more room to run in the near term.
How Does FLR Stack Up to the Competition?
Shares of FLR have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is AECOM (ACM). ACM has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of F.
Earnings were strong last quarter. AECOM beat our consensus estimate by 15.58%, and for the current fiscal year, ACM is expected to post earnings of $3.40 per share on revenue of $13.9 billion.
Shares of AECOM have gained 8.9% over the past month, and currently trade at a forward P/E of 22.67X and a P/CF of 18.45X.
The Engineering - R and D Services industry may rank in the bottom 68% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for FLR and ACM, even beyond their own solid fundamental situation.
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