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雷达卡
Designing Value for the E&C Investor
The Blueprint is a quarterly publication designed for the engineering and
construction investor. The Blueprint highlights stock performance and
provides an in-depth analysis on current hot spots, new contract awards,
industry rankings, backlog, and revenue trends.
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Favor Commodity/Energy Plays in 2010? Over the L/T, we continue to prefer
oil and gas related names vs. power gen and highway/infrastructure markets, as
we believe both will likely lag the recovery in oil and gas. In fact, we believe
backlogs will likely bottom in Q3 for oil and gas related names. On the flip side,
mgmt meetings/channel checks suggest new power gen in the U.S. will likely
remain dead through 2010. Additionally, stimulus dollars related to highway
infrastructure will likely disappoint in 2010 (just like they did in 2009).
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Top Picks MDR & FLR. Our top long-term picks for 2010 continue to be FLR
and MDR. We like MDR’s exposure to upstream markets, margin expansion
potential in J RAY and the L/T potential in nuclear. Finally, for an investor with a
12 month outlook, we believe FLR’s recent sell off will prove to be overdone
given the potential for several overseas oil and gas/mining awards in 2010.
Through year end, U.S. infrastructure names could experience a short-term
bounce on hopes the stimulus (that didn’t happen in 2009) will be incremental to
2010. We believe this will ultimately prove to be disappointing and would use
strength as a selling opportunity.
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2010 Outlooks Around the Corner for the Majors! Both Jacobs and Flour will
provide their first blush on 2010 during the September earnings call. We believe
both will project a wide range around EPS ranging from a modest deterioration
(off 10%) to modest growth (EPS up 5%) before resuming double-digit earnings
growth in 2011. There is possible room for upside later in the year depending on
the pace with which projects move forward.
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Staying Disciplined… but for How Long? There is continued evidence of
aggressive bidding activity in the market—particularly with respect to the Asian
contractors (e.g. FLR lost Habshan to JGC). Other contractors like MDR, FWLT
and KBR have suggested they will walk away from low bid work or areas they
can’t add value (i.e. take a PM role vs. construction) to mitigate the risk
associated with fixed price work. While additions to backlog are typically
welcomed by investors, we believe the quality of backlog takes precedence to
the quantity. Still, risk to margins is likely in the 2011-2012 time frame.
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