JBL: Getting All Worked Up Over Nothing

I swear Wall Street is sometimes like a bunch of old men sitting around a barber shop -- telling the same old stories and getting worked up over nothing. Recently, Wall Street has been getting worked up about Fluor (FLR Quote), which is in the investment doghouse. But Fluor's death is greatly exaggerated.

Fluor's raison d'etre is building things fast -- and well. When it recently moved to Las Colinas, Texas from Southern California, Fluor completed a three-story, $60 million headquarters building in eight months, a project that would take most builders 12 to 15 months.

Fluor is rebuilding Iraq's water system and installing thousands of temporary homes in hurricane-damaged Louisiana, one of over 80 disaster areas where the company has provided services to the U.S. government. Fluor is even overseeing the construction of pedestrian tunnels that lead to subways at the World Trade Center. It's also involved in major transportation projects, including building State Highway 130 in my home state of Texas.

After a flurry of contracts in 2004, the company posted fourth-quarter results that were disappointing in terms of new bookings and operating earnings. The company also suffered a decrease in its operating margin, which it credited to losses on U.S. embassy projects, for which Fluor is now assessing its "continuing interest."

The good news is that the company has a backlog of almost $15 billion, $9 a share in cash and very little debt. Consensus EPS estimates are for $3.05 this year and $3.79 next year, a 28% increase. If the current price-to-earnings ratio of 32 stays constant, you're looking at a $97.60 stock based on 2006 estimates and a $121.28 stock on expected 2007 earnings. Now that is something the old men at the barber shop can really talk about.

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