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Fluor's (FLR) Stork Wins HES Hartel Tank Terminal Contract

Zacks Equity Research

Stork, which is part of Fluor Corporation’s FLR Diversified Services business, has received a contract from HES Hartel Tank Terminal — a project of HES International — to support the construction of the new tank terminal.

Stork will work as a lead piping, mechanical and structural contractor to build the 1.3-million cubic meter greenfield liquid bulk storage terminal, located at the Maasvlakte in the Port of Rotterdam, Netherlands. Also, its contract work includes the provision of temporary facilities; material handling and storage facilities; and equipment and tools through its division EQIN (Equipment Intelligence). The construction will be bolstered by its service centers in the Netherlands and prefabrication yard in Belgium.

Notably, the contract — which started in November 2019 — is expected to be completed by the end of September 2021. The company’s fourth-quarter 2019 backlog will reflect the contract value. Post the completion of this project, Stork would install more than 75 kilometers of piping.

New Awards to Revive Fluor’s Diversified Services

Revenues from the Diversified Services segment — which accounted for more than 13% of total third-quarter 2019 revenues — slipped 0.9% year over year in the quarter. Also, operating margin contracted 220 basis points. The downside was primarily due to lower volumes in the operations and maintenance business, as well as divesture of the equipment business in Mexico.

Nonetheless, it believes that the diversified service business will improve in the upcoming quarters as clients have already started increasing maintenance spending. It initiated certain restructuring activities to optimize costs and improve operational efficiency in the Stork business during the first quarter.

Meanwhile, shares of Fluor have declined 20% in the past three months, almost in line with the industry's 20.5% fall. We believe new contract wins and the above-mentioned initiatives will help revive the company. Over the last few quarters, major wins have allowed Fluor to expand long-term recurring revenue opportunities. During the third quarter, quarter-end backlog was $2.4 billion compared with nearly $2 billion a year ago. Solid backlog level will aid the company to generate higher revenues in the near term.

Zacks Rank

Fluor — which shares space with Gates Industrial Corporation plc GTES, Quanta Services, Inc. PWR and AECOM ACM in the same industry — currently carries a Zacks Rank #3 (Hold). You can see ">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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