Think about how absurd this sounds: Any .com, with no earnings and little in the way of revenue, can go public and command a multibillion-dollar market value on little more than the hope that it'll be a winner. Yet an old-line stock market reject like
, with billions in revenue and hundreds of millions in profits, announces a restructuring plan geared to improve profitability and shareholder value -- the same kind of plan that a decade ago would've caused investors to cheer -- and its stock goes straight down.
On one hand, it's hard to blame the sellers: The Internet is, well, the Internet and Fluor is little more than one of the world's largest international engineering, procurement, construction, maintenance and diversified services companies, with an important investment in low-sulfur coal and 40% of its revs tied to oil. (In other words, in this kinda market, it's the Wall Street equivalent of
The most aggressive Fluor seller, in recent weeks, is believed to have been
, which had been shaving its stake over the past year. As of the latest filing, it owned 7.6% of the company, down from around 13% in early 1998. But for every seller there's a buyer, and Fluor's buyers have included the likes of San Francisco's
Dodge & Cox
, the operator of value-oriented mutual funds, as well as hedge funds, including the
in Stamford, Conn. Dodge & Cox, which owns a 5.6% stake, declined comment. But Bayou's Jim Marquez said, "When any company that in normal times can generate high teens to the low 20s in return on equity, and needs little capital to do it, and is one of the premier companies in its industry, and you can buy it for nine or 10 times earnings, you just do it."
His interest in the company, which he has tracked for years, was piqued by the restructuring, announced March 9. But his interest grew a week and a half ago when "
, of all people," announced that orders were up in Asia. Asia accounts for 18% of Fluor's current backlog.
Backlogs, in general, have been falling at Fluor, and the company doesn't expect its Asian business to turn for another year or two. In fact, earnings in general are expected to be down for another two years. But Marquez says the falling backlogs are good news, not bad news, because Fluor, under old management, used to bid on any contract "regardless of whether it would ever be profitable."
New management, led by Philip Carroll, the former CEO of
, was hired last summer. "He said he won't just bid to buy business activity," Marquez says. "He said, 'We want to make money.' "
He then talked about a restructuring, and the stock rose in front of the announcement. "Then they announced it," Marquez says, "and you would've thought somebody shot somebody's grandmother." The stock went straight down on straight liquidation," as Fidelity and others presumably bailed. Fidelity officials couldn't be reached. "Fluor is trading at a 10-year low and it's being liquidated," Marquez says. The company says it believes the selling was due in part to its own forecast that earnings will be down over the next two years.
While earnings are expected to drop 7% to 9% a year over that period, Marquez says, Fluor is still profitable in an industry that has experienced the equivalent of an all-out earnings collapse. "That's why this bull market can go on," he says. "This other stuff is being thrown away," and at some point he believes the value will somehow, some way, be recognized.
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
firstname.lastname@example.org. Greenberg writes a monthly column for Fortune and provides commentary for CNBC.