KBR, Inc. (KBR), Chicago Bridge & Iron Company N.V. (CBI), Fluor Corporation (NEW) (FLR): Should You Follow David Tepper and Buy These E&C Companies

Accelerating new orders and strong cash position

Fluor Corporation (NEW) (NYSE:FLR) booked new awards worth $7.2 billion in the last quarter, a sequential increase of 10%. Going forward, new award run-rate is likely to further accelerate given high oil prices which are acting as a catalyst for high capex investment by petrochemical and LNG companies.

The company’s prospects in power business also look good. Recently, the company announced that it has received a final notice to proceed on a $1 billion natural gas-fired power station project by Dominion Virginia Power. The company is expected to book ~$800 million into backlog in the third quarter from this project. To put it into perspective, this is greater than total $500 million in power awards which the company received in first half of this year.

In addition to backlog growth, company is witnessing a mix shift from low margin mining projects to high margin hydrocarbon projects. This will help the company’s margin going forward.

Fluor Corporation (NEW) (NYSE:FLR) is trading at a forward P/E of 14.31 times consensus EPS estimates. However, if we adjust for ~$2.5 billion cash on its balance sheet, it is trading at just 10.84 times forward earning which is low given its good growth prospects.

Conclusion

To sum up, it makes sense for investor to follow David Tepper and initiate position in these E&C companies at current prices. The valuations of these companies are low and most of them have good growth prospects given the encouraging outlook for capital expenditure by Hydrocarbon companies (their end customers).

The article Should You Follow David Tepper and Buy These E&C Companies originally appeared on Fool.com and is written by Ash Sharma.

Ash Sharma has no position in any stocks mentioned. The Motley Fool owns shares of Fluor.

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