Executive Summary / Key Takeaways

• Fluor Corporation is executing a strategic pivot from a "fix and build" phase to a "grow and execute" strategy, emphasizing an asset-light, majority-reimbursable business model. This transformation is designed to drive profitable growth by leveraging specialized engineering, procurement, and construction (EPC) expertise in high-demand markets.
• The company reported robust financial performance in the third quarter of 2025, with net earnings attributable to Fluor soaring to $697 million and adjusted EPS reaching $0.68, despite a significant $653 million revenue reversal related to the Santos litigation. Operating cash flow also saw a substantial improvement, reaching $286 million in Q3 2025.

• A major financial catalyst is the planned monetization of Fluor's remaining 111 million NuScale Power shares, expected to commence in November 2025 and conclude by Q2 2026. Proceeds are earmarked for an aggressive share repurchase program, targeting $800 million through February 2026, signaling strong confidence in future value creation.
• Fluor is strategically positioning itself in high-growth sectors such as advanced technologies and life sciences (ATLS), mining and metals, and the burgeoning power market, including nuclear and gas-fired generation, driven by astronomical demand from data centers. This focus, coupled with its unique project execution capabilities, underpins a long-term outlook for significant new awards, albeit with an anticipated four-quarter shift in EBIT delivery.
• Key risks include the ongoing Santos litigation and associated insurer disputes, potential impacts from global trade policy uncertainties, and the execution of remaining legacy infrastructure projects. However, Fluor's disciplined pursuit criteria and strong client relationships aim to mitigate these challenges.

A Century of Engineering: Fluor's Evolution and Strategic Pivot

Fluor Corporation, established in 1912, has a long and storied history in the engineering, procurement, and construction (EPC) industry. Historically, the EPCM market was characterized by intense competition, often leading to aggressive lump-sum contracts, increased risk-taking, execution challenges, and thin margins. This dynamic significantly impacted Fluor, with its share price falling below $4 in March 2020. In response, the company initiated a transformative "fix and build" strategy in early 2021 under former CEO David Constable. This strategy successfully pivoted Fluor towards lower-risk, reimbursable projects, increasing its reimbursable backlog from 45% to 80% and reducing exposure to loss-making legacy projects from $1.8 billion to $558 million. This strategic overhaul resulted in a 14% compound annual growth rate in EBITDA from fiscal year 2021 to fiscal year 2024.

As the company concluded its "fix and build" phase in 2024, Jim Breuer assumed the CEO role in May 2025, ushering in the "grow and execute" strategy. This new chapter emphasizes continued growth in target markets, disciplined project delivery, and leveraging an asset-light, majority-reimbursable backlog. A key component of this asset-light model was the substantial completion of the Stork business divestiture, with operations in continental Europe sold in 2024 and U.K. operations in 2025.

Fluor's core differentiation lies in its project execution leadership, complex engineering acumen, robust supply chain, and construction expertise. The company is recognized as one of the few global EPC firms capable of tackling large, complex projects, particularly in specialized areas like nuclear power. This comprehensive capability is not a single technology but an integrated approach that includes modularization expertise, which is increasingly valuable in sectors like data centers for potentially faster construction, cost efficiency, and quality control. Furthermore, Fluor's early $30 million investment in NuScale Power proved pivotal, as NuScale became the first U.S.-listed small modular reactor (SMR) company with U.S. Nuclear Reactor Commission design approval. Fluor's unique position as the only firm with NuScale EPC expertise provides a significant competitive advantage in the burgeoning SMR market, offering low-carbon energy solutions crucial for energy security and addressing escalating power demands.

In the broader industry landscape, Fluor operates in what is described as a duopoly of global end-to-end EPCM players with Bechtel, following the exit of many large construction and EPCM players. The construction market itself has grown rapidly, now exceeding $918 billion. This competitive environment, coupled with significant industry trends such as AI-driven data center demands, increased power generation needs, and U.S. infrastructure on-shoring, creates substantial opportunities for Fluor. The company's strategic focus on these areas, including advanced technologies and manufacturing (ATLS), mining and metals, and the power market, positions it to capitalize on these macro tailwinds.

Operational Excellence and Segment Dynamics

Fluor's operational performance in the third quarter of 2025 showcased both significant achievements and ongoing challenges across its segments.

The Urban Solutions segment, encompassing Advanced Technologies and Life Sciences (ATLS), Mining & Metals, and Infrastructure, demonstrated strong revenue growth. Revenue increased by 21.34% to $2,343 million in Q3 2025 from $1,931 million in Q3 2024, and by 25.38% to $6,570 million for the nine months ended September 30, 2025, compared to the prior year period. Segment profit, however, decreased to $61 million in Q3 2025 from $68 million in Q3 2024, and to $160 million for the nine months, down from $223 million. This decline was primarily due to a $25 million adjustment for delay-related effects on an infrastructure project and $54 million in forecast adjustments for cost growth on three infrastructure projects, stemming from subcontracted design errors, price escalation, and schedule impacts. These were partially offset by favorable negotiations and the ramp-up of recently awarded life sciences and mining projects. New awards in Urban Solutions surged to $1,760 million in Q3 2025, a significant increase from $828 million in Q3 2024, contributing to a backlog of $20,507 million as of September 30, 2025. Management remains optimistic about opportunities in copper, rare earth, critical minerals, aluminum, green steel, and anticipates a Q4 award for a pharmaceutical facility. The company is actively pursuing data center projects, leveraging its modularization expertise to address the growing demand for hyperscalers in North America.

The Energy Solutions segment experienced a challenging quarter, with revenue plummeting by 81.65% to $262 million in Q3 2025 from $1,428 million in Q3 2024. For the nine months, revenue decreased by 41.39% to $2,611 million. The segment reported a loss of $533 million in Q3 2025, compared to a profit of $50 million a year ago. This significant decline was primarily due to a $653 million revenue reversal related to a court ruling on the long-completed Santos project in Australia. Additionally, execution activities at a Mexican joint venture were temporarily slowed due to payment delays, though significant payments received in Q3 and October 2025 have enabled a controlled restart. Despite these setbacks, the LNG Canada project achieved "Ready for Startup" on Train 2 in Q3 2025, with all systems handed over to the client, marking a major operational milestone. Fluor's joint venture also secured an award to update the Front-End Engineering and Design (FEED) package for a potential Phase 2 expansion of LNG Canada. New awards for the segment were modest at $222 million in Q3 2025, and backlog stood at $5,121 million. The outlook for Energy Solutions anticipates a "reloading" year in 2025, with most new awards expected in the second half of 2026 and into 2027, focusing on power generation (nuclear and gas-fired), advanced technologies, and LNG.

The Mission Solutions segment delivered a mixed performance. Revenue increased by 19.84% to $761 million in Q3 2025 from $635 million in Q3 2024, and by 9.28% to $2,120 million for the nine months. Segment profit, however, declined to $34 million in Q3 2025 from $45 million in Q3 2024, and to $73 million for the nine months from $108 million. This was due to allowances for questioned and disputed costs on a DOD project, partially offset by a favorable resolution of a long-standing claim. The nine-month period also included $28 million in revenue reserves from a ruling on a 2019 project claim. New awards were strong at $1,271 million in Q3 2025, including a $1.1 billion six-year contract for the DOE's Portsmouth project in Ohio and a position on a Defense Threat Reduction Agency contract with a potential value of up to $3.5 billion over 10 years. Backlog for the segment was $2,608 million. Fluor is well-positioned for future opportunities in national security, including the Savannah River Plutonium project and nuclear enrichment prospects.

The "Other" segment, following the divestiture of Stork businesses and deconsolidation of NuScale, is expected to be immaterial for 2025 and beyond.

Financial Resilience and Capital Allocation

Fluor's financial position reflects a strengthened capital structure and a clear focus on returning value to shareholders. For the nine months ended September 30, 2025, net earnings attributable to Fluor significantly increased to $1.522 billion, or $9.21 per basic share, compared to $282 million, or $1.65 per basic share, in the prior year period. This substantial improvement was largely driven by the pre-tax gain from the NuScale deconsolidation in Q4 2024 and subsequent mark-to-market gains. In the third quarter of 2025 alone, net earnings attributable to Fluor were $697 million, or $4.30 per basic share. Adjusted EBITDA for Q3 2025 was $161 million, up from $124 million a year ago, with adjusted EPS at $0.68, compared to $0.51 in Q3 2024.

Operating cash flow for the nine months ended September 30, 2025, was $21 million, negatively impacted by lower earnings. However, Q3 2025 saw a significant improvement in operating cash flow, reaching $286 million, driven by reduced working capital on several large projects and distributions from a large Energy Solutions joint venture. The company ended Q3 2025 with $2.776 billion in cash and cash equivalents and maintained a borrowing capacity of $902 million under its $2.20 billion credit facility.

A cornerstone of Fluor's capital allocation strategy is the monetization of its investment in NuScale Power . In Q3 2025, Fluor converted 15 million NuScale voting shares into registered shares, selling 10 million for $414 million in net proceeds. An additional 5 million shares were sold in October 2025 for $191 million. In November 2025, an agreement was reached to convert the remaining 111 million NuScale shares, with sales expected to begin by mid-November 2025 and conclude by the end of April 2026. This monetization plan is crucial for delivering significant value to Fluor shareholders. The company has already repurchased 9 million shares for $365 million in the first nine months of 2025 and targets an additional $800 million in repurchases from November 2025 through February 2026, utilizing operating cash flow and proceeds from the September 2025 NuScale share sales. A substantial portion of the prospective monetization from the November 2025 NuScale conversion is expected to fund further share repurchases after February 2026.

Despite these positive developments, Fluor continues to manage legacy project obligations. As of September 30, 2025, legacy projects in a loss position represented $394 million of backlog, with approximately $117 million in estimated unfunded losses, a reduction from $702 million of backlog and $237 million of unfunded losses at December 31, 2024. The company expects to fund approximately $70 million for legacy projects in Q4 2025 and around $140 million in 2026. A significant financial challenge arose from the Santos litigation, with a Queensland Supreme Court ruling in August 2025 generally accepting recommendations against Fluor. Santos is expected to seek a judgment of approximately $665 million (including interest) in Q4 2025, which led to a $653 million revenue reduction in Q3 2025. Fluor has appealed this ruling and is actively working with its insurance carriers, though five insurers have disputed coverage.

Competitive Edge in a Dynamic Landscape

Fluor operates in a highly competitive global EPC market, often described as a duopoly alongside Bechtel for end-to-end project delivery. Its primary publicly traded competitors include Jacobs Engineering , KBR , AECOM , and Quanta Services , all vying for market share in overlapping segments.

Fluor's competitive advantages are rooted in its specialized expertise and integrated service offerings. The company's strong brand and long-standing client relationships, particularly with government entities and in the nuclear sector, translate into enhanced customer loyalty and recurring revenue from mission-critical contracts. This allows Fluor to command superior pricing power in these specialized segments. For instance, its deep experience in nuclear operations and waste management provides a qualitative edge over competitors like KBR (KBR), who also have government ties but may lack Fluor's specific depth. Fluor's proprietary EPC processes, including its modularization capabilities and asset integrity services, offer tangible benefits in challenging project environments, such as remote locations or those requiring rapid deployment. This differentiates Fluor from firms like AECOM , which often focus more on consulting and design.

However, Fluor also faces competitive vulnerabilities. While its diversified offerings across Urban Solutions, Energy Solutions, and Mission Solutions provide resilience, it may lag some competitors in specific areas. For example, Jacobs Engineering is often perceived as more advanced in digital integration, potentially offering greater efficiency in project execution. Similarly, AECOM (ACM) has demonstrated stronger trends in innovation speed for sustainable technologies. Financially, some competitors like Jacobs (J) and Quanta Services (PWR) have shown stronger trends in revenue expansion and cash flow generation, potentially due to their more focused market approaches or faster project deployment capabilities. Fluor's operating margins and return on invested capital (ROIC) may appear less resilient in volatile markets compared to these rivals, partly due to its broader exposure to energy sector fluctuations and the lingering impact of legacy projects. Customer concentration, particularly in large government contracts, also presents a vulnerability, as the loss of key contracts could significantly impact revenue stability.

In response to these competitive forces, Fluor strategically positions itself by emphasizing its unique capabilities for complex, integrated projects. Its focus on high-demand growth markets like AI-driven data centers, where power generation is a critical component, leverages its expertise in both thermal and nuclear power solutions. This strategy aims to secure strategic relationships with clients seeking comprehensive, reliable project delivery rather than engaging solely in competitive bidding on price.

Outlook and Investment Thesis

Fluor's outlook for 2025 and beyond reflects a company in transition, poised for growth despite near-term market uncertainties. Management has increased its full-year 2025 adjusted EBITDA guidance to $510 million to $540 million and adjusted EPS guidance to $2.10 to $2.25. Operating cash flow is projected to be between $250 million and $300 million for the full year, excluding the anticipated Santos payment. The company expects new awards of $13 billion and revenue to be roughly flat with 2024, excluding the Santos effect. Segment margins are guided at approximately 2.5% for Urban Solutions, 6% for Energy Solutions (excluding Santos effect), and 4.5% for Mission Solutions.

Looking further ahead, management anticipates approaching $90 billion in new awards over the four-year planning cycle ending in 2028, with most awards concentrated in 2026-2028 and associated EBIT delivery in 2027-2029. This represents a roughly four-quarter shift in EBIT delivery due to external factors causing award delays, potentially pushing the 2028 ultimate goal to 2029. However, early indications suggest 2026 EBITDA generation will be marginally better than 2025. Fluor is actively mitigating these delays by accelerating efforts in high-growth markets such as mining and metals, power, advanced technologies, and LNG.

The investment thesis for Fluor is compelling, centered on its successful strategic transformation to an asset-light, reimbursable model, and its unique capabilities in specialized, high-demand sectors. The monetization of the NuScale investment is a significant catalyst, providing substantial capital for shareholder returns through an aggressive share repurchase program. This, combined with a strong backlog and a disciplined approach to new project pursuits, positions Fluor for long-term value creation.

However, investors should monitor several key risks. The Santos litigation, with an anticipated $665 million judgment and ongoing insurer disputes, presents a near-term financial headwind. Broader economic and geopolitical dynamics, including trade policies and cost escalation, could continue to cause client hesitation and project delays. The company is also subject to securities class action and derivative lawsuits related to past statements on project costs and risk mitigation. While Fluor has made significant progress in addressing legacy projects, ongoing funding requirements and the pursuit of cost recoveries remain.

Conclusion

Fluor Corporation is undergoing a profound strategic transformation, shedding legacy risks and embracing an asset-light, majority-reimbursable business model. This pivot, initiated under previous leadership and now driven by CEO Jim Breuer's "grow and execute" strategy, positions the company to capitalize on its specialized EPC expertise in high-demand global markets. The successful monetization of its NuScale (SMR) investment, coupled with a robust share repurchase program, underscores management's confidence in delivering significant shareholder value.

Despite near-term challenges from the Santos litigation and broader market uncertainties causing project delays, Fluor's strong backlog, disciplined project pursuit criteria, and unique technological capabilities in areas like nuclear SMRs and modular construction provide a solid foundation for future growth. The company's strategic focus on advanced technologies, life sciences, mining, and the burgeoning power market, particularly for data centers, aligns it with powerful long-term industry trends. While competitive pressures exist, Fluor's established brand, deep client relationships, and comprehensive project execution leadership differentiate it within the global EPC landscape. Investors should recognize Fluor's strategic ascent, driven by its core strengths and adaptive approach to evolving market dynamics, as it aims to convert its robust pipeline into sustained profitable growth.