Fluor (FLR 2.51%) is working diligently to make its business a more reliable source of cash flow. It has made significant progress as well. That's good news, but is it enough to justify buying the stock in the hope of setting yourself up for life? What if you add in Fluor's large ownership stake in an exciting nuclear power start-up?
There's a lot to like about Fluor, but you still might want to tread with caution. Here's why.
What does Fluor do?
Fluor is an engineering and construction company. Essentially, businesses and governments hire Fluor to build things for them. These are massive structures, such as power plants, office buildings, and roads. And Fluor is good at what it does.
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However, Fluor has been changing its core business approach. Historically, it bid on many contracts with set prices. If construction costs ended up lower than the contracted price, Fluor retained the extra cash. If construction costs ended up higher than the contracted price, Fluor had to pay for the cost overruns. That exposed the company to significant financial risk and led to a fairly volatile income statement.
The company decided that it needed to shift its focus so it could show Wall Street more consistent financial results. To that end, 82% of the company's $28.2 billion backlog is now made up of reimbursable contracts. That's great news, and investors should be pleased. However, there's still one small problem.
Large construction projects tend to be a bit cyclical. When times are flush, things get built. During recessions, large construction projects are often canceled or put on hold. Therefore, even though Fluor's business is likely to be more consistent in the future than it has been in the past, the inherent nature of the business remains volatile. Even now, it is likely to put you at risk of dealing with significant price swings.
NYSE: FLR
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What about the NuScale Power investment?
What has a lot of investors excited about Fluor today is its investment in NuScale Power (SMR 5.01%), a company that is attempting to build a business around small, modular nuclear reactors. This investment wasn't altruistic; Fluor is likely hoping to win contracts around the construction of power plants that use NuScale's reactors. In fact, the two companies are doing early stage work to help get such a power plant approved in Romania.
That's great, but there's a wrinkle here. That power plant would be NuScale Power's first sale. And the final investment decision on the power plant won't arrive until late 2026 or early 2027, a delay from earlier expectations. Right now, NuScale Power is just a money-losing business with high hopes. The share price, as you might expect, has been highly volatile.
Fluor is looking to sell its stake in NuScale to raise cash for other purposes, such as strengthening its balance sheet and investing in growth. In October of 2025, it raised $605 million via a sale of part of its stake. This clearly has the potential to be a big payout, with Fluor and NuScale agreeing to a deal around the rest of Fluor's stake that should see it get sold by the middle of 2026.
NYSE: SMR
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What's the rest of the Fluor's NuScale Power stake worth? It's hard to tell given the volatility of NuScale Power's stock. The October sale came near a price peak. The shares have declined 70% since that high-water mark. There is value in the NuScale stake, but how much value is hard to tell and entirely dependent on the whims of Wall Street.
Again, that suggests volatility. Additionally, it is a one-time event, so even though it presents an interesting investment angle, it won't likely help set an investor up for life.
Fluor is most appropriate for risk-tolerant investors
None of this is to suggest that Fluor is a bad company. It is, in fact, a very well-respected construction business. What it isn't, however, is a consistent business. The very nature of the construction industry doesn't allow for consistency. Therefore, it is challenging to recommend that most investors should consider it as a long-term investment.
Only investors who have a high tolerance for risk should consider it, and the NuScale Power stake, while interesting, doesn't materially change the story.
