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Building the Future With Fluor


Fluor is one of the world's largest, publicly-owned engineering, procurement, construction and maintenance service companies.

"Talkin' to myself and feelin' old
Sometimes I'd like to quit
Nothing ever seems to fit
Hangin' around
Nothing to do but frown
Rainy Days and Mondays always get me down"
-Paul Williams & Roger Nichols(Rainy Days And Mondays)

Well, today in the Tri-State area I get to deal with a rainy Monday. Not exactly the best of both worlds, but I will persevere. And for the record, say what you want about The Carpenters, but that girl could sing.

As for me, I just got back from a week's vacation down at Long Beach Island, New Jersey, so I have nothing to be down about. The weather was incredible and there is no price tag for spending quality days on the beach with the family. But I am still always looking for trade ideas and my trip "down the shore" reinforced a notion I have had for quite some time.

A section of beach in Surf City was being replenished when ammunition from World War II was discovered in the sand. Of course you can imagine the clever T-shirts that have found their way into local shops, "I got bombed in Surf City" being the current favorite. Personally, I would have liked "Surf City Blows Away The Hamptons," but I digress.

As it turns out, the U.S. Army Corps of Engineers came in and closed down sections of beach before some shovel-wielding 9-year-old set one of the ordinance off during his or her quest of digging to China.

That's when my personal light bulb went off: Engineers and China!

Global infrastructure continues to be a huge story. Nuclear power plants are going to be built. Refineries are under a constant state of maintenance. Mining projects continue to pop up all over the globe. Fluor (FLR) is one of the world's largest, publicly-owned engineering, procurement, construction and maintenance service companies. Currently trading around $120, FLR has seen quite a move already as the stock started this year with a $70 handle.

Furthermore, on a valuation basis FLR is significantly more expensive than, say, Halliburton (HAL). But I think FLR's diversification of industries it services warrants the rich price tag.

Back on May 7 Fluor reported a 1Q EPS of $0.94 versus a consensus of $0.87 but, of significantly more importance, FLR reported their backlog was up 54% to $23.7 bln. FLR is due to report their 2Q after the close on August 7. The "Street" is looking for $0.95 EPS on $3.79 bln in revenues.

My sense is that we can play this a couple of different ways - wait until earnings and hope it misses so we can gobble some stock up into the sell-off, or start to build a position into earnings. Either way, I think that FLR is a stock we want in our portfolios. The global infrastructure boom is not going away any time soon. Fluor is one of the companies that finds itself right smack in the sweet spot of the global build out.
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No positions in stocks mentioned.

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