What happened
Shares of Fluor (FLR 0.82%), a construction and infrastructure company focused on the energy sector, were climbing last month as investors bet that the company would benefit from a spike in oil prices, which came as Russia invaded Ukraine and European companies pledged to wean themselves off of Russian oil and gas.
According to data from S&P Global Market Intelligence, the stock finished the month up 32%. As the chart below shows, most of those gains came in the first week of the month as West Texas Intermediate prices rallied from $95 to $123 a barrel.
So what
Fluor's biggest segment is energy solutions, comprising $1.3 billion in revenue in 2021, or 41% of its total. Its energy solutions business consists of supporting oil, gas, and petrochemical companies in a range of capital projects to help with energy production, refining, and other functions. It also develops projects to transition away from fossil fuels.
Image source: Getty Images.
With oil prices spiking last month, Fluor seems poised to benefit as fossil fuel companies will be more flush with cash to spend on infrastructure projects, and demand for green energy sources will also increase.
Additionally, Fluor's mission solutions business, which made up $880 million in revenue last year, or 28% of the total, is focused on nuclear power, handling national security missions for the Department of Energy. The company also provides other services to the military. With nuclear weapons gaining attention from Russia's attack, Fluor could benefit from increased spending on nuclear energy and weapons or a possible military intervention.
Toward the end of the month and into April, the company also moved closer to taking its subsidiary Nuscale Power public through a SPAC. It received a $110 million investment from Japan Bank for International Cooperation and a $15 million investment from Nucor.
Now what
When Fluor reported fourth-quarter earnings, the company offered strong guidance for 2022, calling for adjusted earnings per share of $1.15 to $1.40, or 22% to 49%. However, the surge in the stock early in March indicates investors may expect EPS to be even better than that.
Fluor still looks reasonably priced, trading at a price-to-earnings ratio of 23 based on the midpoint of the forecast. The company could also benefit from the Nuscale listing and the $1 trillion infrastructure bill passed last November.
If oil prices remain elevated, the infrastructure stock could easily move higher from here.
