Fluor: "Money in the Bank"

09/26/2003 12:00 am EST


Elliott Gue

Editor and Publisher, Energy and Income Advisor and Capitalist Times

Rarely do construction stocks make for exciting reading. Fluor, the latest buy from Elliott Gue, is an exception. Its potential markets range from helping rebuild the power grid to construction projects in Afghanistan and Iraq. Here are the details from the latest Personal Finance.

"From designing and building power plants in the US to overseeing the upgrade of runways in Afghanistan for the U.S. Airforce, Fluor (FLR NYSE) is one of the world's largest engineering and construction companies. The Great Blackout has put the company's power plant construction and design operations in the spotlight. With good reason, it's clear that an extensive upgrade of the nation's power grid, coupled with new power plant construction, will be necessary to meet power needs in the coming years. The blackout is already a hot topic in Washington, and the politicians are just getting warmed up; look for a tide of new legislation and political finger-pointing to keep the nation's power grid on the front pages for months to come. That's sure to keep Fluor in the spotlight. And it's not just a U.S. problem; the London blackout that left thousands stranded during rush hour last month means that there will be political pressures abroad for similar upgrades. That's money in the bank.

"But Fluor isn't solely a power plant construction play. The company designs and builds facilities for companies in other industries including pharmaceuticals, mining and telecommunications. That diversification keeps growth going even when construction activity slows. Even better, Uncle Sam, the most stable and reliable consumer of all, is a good customer. The company has expanded aggressively into construction and engineering services for the U.S. government. Don't be surprised to see new contract wins for projects in both Iraq and Afghanistan. The stock has a debt-to-equity ratio below 20% and offers a dividend yield of 1.75%. The valuation isn't excessive by historical standards at only 3 times book value. Buy Fluor below 39."

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