The engineering and construction companies had a great year in 2007, and the current environment is like that of the deep offshore drillers. They have large backlogs of work, and an environment that is very bullish for their businesses. Fluor Corp. (FLR) is the largest, and arguably the best one of these companies.

One hundred and one days ago, I placed a buy recommendation on theupdown.com, and since then it is up 45.20%. The world is currently a bullish venue for infrastructure and energy, and based on its size and specialization, FLR is in the best position to take care of the world's needs. Revenue for 2007 was $16.7 billion and at the end Q1 2008, the company had a $31.5 billion backlog.

Engineering and construction companies have good transparency with respect to forward growth. Not only do they have transparency, but they are also the center of a worldwide infrastructure that facilitates the growth of many emerging economies. The company has good diversity with respect to its business, as FLR received 54% of its revenue from oil and gas in the first quarter. Infrastructure was 16% of its business, global services was 15%, power was 9%, and government was 6%. Regarding its backlog, 65% is oil and gas, 18% infrastructure, 8% global services, 7% power and 2% government.

Going forward, FLR's growth will be bolstered by an oil and gas market that is at the top of everyone's agenda. The company is currently working closely with the Middle East to increase oil production. U.S. refineries need to be upgraded, North American power plants need to be built, and there is nuclear work to be done in both Russia, and the U.S.

New contracts have been steadily increasing each quarter since Q2 of 2006. The amount of the contracts awarded have been anywhere between $4.5 billion and $6.3 billion. Over that same period, the backlog has increased every quarter, from $18 billion to $31.5 billion.  Forty-six percent of this backlog is in the U.S., 40% is in Europe, Africa and the Middle East, 9% Asia, and 5% Americas.

Revenues for the first quarter were up 32% year over year. Operating profit was up 40%, net earnings were up 63%, EPS was up 60%, new contracts were up 28% and its backlog increased 33%. Its cash, dividend and return on capital all saw significant increases. Its debt to total capital decreased from 25% to 12%, and EPS has increased every year from 2004. Estimates for this year have the company showing very good growth.

Analysts have the company's earnings growing 46.8% this year. Next year, they are projecting growth at 19.7%. The company has beat earnings estimates in three out of the last four quarters. However, based on world's future power needs, I think these estimates a very low. Not only is oil rising significantly, but also so are natural gas and coal. This shows the need, and as these needs continue to increase, energy and coal will do very well.

I think this will be another excellent year for FLR. Current trends have this stock going to $250. I would look for a stock split in the near future.

Disclosure: None

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Michael Filloon

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