All Entries Tagged With: "Engineering Stocks"

Fluor (FLR) the World’s Largest Engineering Company a BUY

Fluor (FLR) is one of the world’s largest engineering, procurement and construction companies.

What I Like about FLR

I think FLR is way undervalued is a strong buy opportunity leading into 2010. I project for FLR to have improved revenue growth heading into the New Year with new orders picking up due to favorable market trends. I also foresee FLR benefiting from increased activity overseas. In China alone, there is a $600 billion infrastructure stimulus to improve the facilities across the country. This kind of stimulus adds great value to FLR, as since they are the world’s largest engineering company, they will be able to secure a large portion of those contracts. I also think we will see increased activity in the U.S. With unemployment crisis looming, infrastructure projects can be a quick fix. It is calculated that every billion spent on constructing highways, etc creates over 28,000 jobs. This sounds like a number Obama will like to hear making him more likely to pledge more stimulus dollars. Moving on I expect demand to increase in 2010 backed by more oil and gas projects, government spending worldwide on construction projects. We saw construction spending increase 27% in September alone. Anyone who still has caution about the growth prospects, FLR has over $31 billion in future project backlogs adding value if the economic crisis were to continue longer than expected. Adding more value FLR has a strong balance sheet with a solid ROA, strong profit margins, and little debt. With effective costs cuts to be implemented in the New Year these numbers should only continue to improve. Adding to this I think PE ratios and earnings estimates will improve in the New Year. In 2009, earnings dropped due to the large amount of cancellations as a result of the credit crunch. With banks getting healthy and more willing to lend we can expect for infrastructure projects to start up again.

Why Construction and Engineering will be a Bullish Sector?

In 2010, I foresee the sluggish global economy picking up its pace and an increase in spending on capital projects. In my opinion, China will continue to spend billions on infrastructure to maintain their world dominance. I foresee the Middle East, Africa, and Eastern Europe to pledge billions to the construction of infrastructure projects to energize growth in their developing regions. Finally, I believe Brazil will lead resurgence in capital spending across the board in Latin America as they prepare for the 2016 Olympics. In 2009, construction equipment orders have kept stable and have continued to increase due to the large amount of global infrastructure demand. I have no reason to believe that this would not continue to increase throughout 2010. To better the situation, I believe that credit conditions should lighten up allowing for a large amount of delayed construction projects to begin operations again. With recent increases in oil and gas prices, I expect us to see a gradual rebound in oil and gas projects as well. I also anticipate the U.S. to increase its capital spending for highways, tunnels and bridges in 2010 aided by Obama’s $787 billion economic stimulus package and federal/local spending. Going against these predictions are theories that the global markets will continue to struggle. I disagree, for one we have seen great strides recently in the improved economic forecast. As for the sector itself, most major oil companies have already increased capital spending plans as oil is back over $80 a barrel. In the New Year, I expect capital markets to lighten up allowing more lending to take place. Building off this, acquisitions activity should increase as companies have access to lower borrowing rates and attractive multiples. Overall, we are seeing a resurgence in capital projects, which helps the markets across the board as demand for commodities, and resources will increase.

Overall

I like Fluor (FLR) due to its strong balance sheet, large growth prospects overseas, and extensive contract backlog. I think it will continue to prosper throughout the year and heading into 2010 as economic times improve. With FLR trading at around $44.25 I would recommend buying it all the way up to $48 with a 12-month target price of $65.

Construction & Engineering: A Bullish Rebound in 2010

Assessing the current conditions of the capital markets, I am always searching for the next bullish sector. Heading into 2010, I believe Construction and engineering will be a bullish sector and this is why.

Why Construction and Engineering will be a Bullish Sector?

In 2010, I foresee the sluggish global economy picking up its pace and an increase in spending on capital projects. In my opinion, China will continue to spend billions on infrastructure to maintain their world dominance. I foresee the Middle East, Africa, and Eastern Europe to pledge billions to the construction of infrastructure projects to energize growth in their developing regions. Finally, I believe Brazil will lead a resurgence in capital spending across the board in Latin America as they prepare for the 2016 Olympics. In 2009, construction equipment orders have kept stable and have continued to increase due to the large amount of global infrastructure demand. I have no reason to believe that this would not continue to increase throughout 2010. To better the situation, I believe that credit conditions should lighten up allowing for a large amount of delayed construction projects to begin operations again. With recent increases in oil and gas prices, I expect us to see a gradual rebound in oil and gas projects as well. I also anticipate the U.S. to increase its capital spending for highways, tunnels and bridges in 2010 aided by Obama’s $787 billion economic stimulus package and federal/local spending.  Going against these predictions are theories that the global markets will continue to struggle. I disagree, for one we have seen great strides recently in the improved economic forecast. As for the sector itself, most major oil companies have already increased capital spending plans as oil is back over $80 a barrel. In the New Year, I expect capital markets to lighten up allowing more lending to take place. Building off this, acquisitions activity should increase as companies have access to lower borrowing rates and attractive multiples. Overall, we are seeing a resurgence in capital projects which helps the markets across the board as demand for commodities and resources will increase. As you have read I am bullish on both the energy sector, especially Oil and Natural Gas as well as construction. To read my past articles on Natural Gas and Oil click on the links. Moving on, here’s a list of top construction and engineering stocks to invest in.

What Stocks to Buy

Bucyrus International (BUCY)

Caterpillar (CAT)

Dresser-Rand Group Inc (DRC)

Fluor Corporation (FLR)

Foster Wheeler (FWLT)

Honeywell International (HON)

Jacobs Engineering Group (JEC)

Meritage Homes Corporation (MTH)

The Boeing Company (BA)

USG Corporation (USG)

Foster Wheeler: A Stock You Can’t Miss Out On

Foster Wheeler (FWLT) – Foster Wheeler is a global engineering, construction, and project management contractor and power equipment supplier. In business for more than 100 years, Foster Wheeler is a global engineering, construction and project management contractor and power equipment supplier. The company operates through two business groups, the Global Engineering and Construction (E&C) Group and the Global Power Group.

What I Like

FWLT is currently priced at $19.75 making it very attractive. This company is coming off a 52-week high of $63.18 only last summer and tumbled like the rest of the market due to huge concerns. It has huge room to grow and these are the reasons why. FWLT is expected to decline in 2009 by 15% due to the downsize in volume however on the contrary in 2010 expectations have numbers increasing substantially driven by increases in capital expenditures, increases in customer spending levels as oil prices stabilize which will in turn lead major oil corporations to refocus on long-term projects. Emerging markets will come to form as well with billions of dollars to offer and I see FWLT to target this sector and be a leading operator for the global sector. In February, FWLT signed the largest contract ever with Paradip refinery project in India. The contract included over four million E&C man hours, bringing FWLT’s total to around 16.2 million man hours back logged from the end of the first quarter of 2009.  I expect this and additional contracts to begin to benefit results the E&C company in late 2009 and 2010. FWLT also recently changed its domicile to Switzerland from Bermuda, completing the redomestification of its holding company. The company believes the change of incorporation establishes a corporation that is more centrally located within its area of global operations in a country with a stable and well-developed tax regime. Currently, FWLT generates more than 60% of its bookings outside of Europe and the U.S. With Switzerland being neutral this will lead to many tax benefits. Overall, my buy recommendation for Foster Wheeler is based upon attractive valuations, long-term prospectives within the sector, and due to FWLT’s below market P/E they have a very attractive upside potential. Volume is above 100,000, which is the threshold in which I set. They have outstanding numbers with a 76.98% return on equity and 11.03% return on assets. Another plus is the company is not in debt and has half a billion in cash on hand top help expand their worldwide brand. Like we know, Cash is King. This company is the leader in its sector and recently been upgraded by many analysts yet results have yet to sink in.

Sector Outlook

My fundamental outlook for construction and engineering remains Bullish, FWLT is a leading player within this sector. As the recession is slowly coming to an ending point we are seeing a resurgence in renewed spending, both from the public and private sector, in oil and gas projects as well as major infrastructure projects worldwide. The U.S. Government has pledged billions in stimulus dollars to transform the U.S. infrastructure system. Since FDRs huge infrastructure projects the U.S. has put the upkeep and renewal of infrastructure on a backburner of things to do. Well now Obama is striking back pledging billions on billions to reform the public transportation of America. FWLT’s big growth will come from the oil companies who have reiterated their capital budgets and are ready to spend after seeing the price of crude oil increase the past few months. Plus oil is going nowhere but up, read my current article about Why Oil will Surge. I expect Long-Term growth in the sector, as companies such as Foster Wheeler should benefit from power generation projects, including coal-fired plants, oil & gas, and nuclear energy, which appear to be at the beginning of a renewed up cycle. I expect capital spending for highways, tunnels and bridges to be aided in part by state and local government bond issues, and increased federal spending. I see the emerging markets picking up as well with Latin America, Asia, Eastern Europe and the Middle East greatly expanding with large projects with intentions on energizing growth and prosperity. I expect the industry to see basic fluctuations due to the continued uncertainties of the global economy however, valuations for the sector are at historical low levels where long-term prospects are very favorable. I think we think these companies will outperform the market substantially.

Risks

Basic risk against FWLT are insufficient amount of funds due to tight capital markets making it hard to fund and supply projects result in delays and cancellations, lowered oil and gas prices, and overall weakened global economy.

Overview

Foster Wheeler (FWLT) is about to deliver some big time results due to the fact that the whole sector is greatly undervalued. I project a 12-month target price of $34. I purchased a large sum and I hope you will to after realizing the potential.

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