Even with some bumps in results released in recent weeks, large public engineering and construction firms still offered investors and industry observers overall good news for year-end numbers and strong optimism for global market trends in 2013.
Write-offs on problem projects nicked earnings for Fluor Corp. and KBR; their reports, released in late February, prompted a 2% falloff for the group of E&C firms tracked by Credit Suisse. But senior analyst Jamie Cook was encouraged by evidence "that labor markets in the U.S. are tightening, driven by energy infrastructure spend, while the industry is also moving to more cost-plus."
Fluor CEO David Seaton reported $211 million in new awards in 2012's fourth quarter, including maintenance agreements with major industrial and mining clients, driven by their increased willingness to sign long-term contracts as they "see modest improvements in the U.S. economic picture."
Maxim Sytchev, a managing director of institutional research at AltaCorp Capital, Toronto, was encouraged by Fluor's optimism about front-end engineering awards already booked and prospects for the next 12 months of business, which the firm says will surpass the 2007-08 pre-recession peak. "This is a very encouraging indicator," he said in a Feb. 20 report. While noting that U.S. firms are more bullish than Canadian firms, Sytchev said, "We still believe the macro backdrop is improving for the E&C industry, underpinning our predominantly positive view on the space."
A report by management consulting firm PricewaterhouseCoopers shows the construction-materials sector leading in 2012 acquisitions, which firm sector leader Kent Goetjen says is "largely driven by high investor interest in targets in the cement and concrete business."