Fluor (FLR) to Transform Red & Purple Rail Lines in Chicago

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Fluor CorporationFLR , along with its joint venture firm Walsh Construction Company, has received a contract to design and build the Phase One of the Red and Purple Line Modernization Program for the Chicago Transit Authority ("CTA").

The project, which costs $2.1 billion, is the largest capital project in CTA's history. Also, the project will improve infrastructure and capacity of the region's most used rail lines.

The joint venture of Fluor and Walsh, along with its designer Stantec Consulting Services, will bring in newest ideas and features in this project. Also, the partnership will deliver improved quality, safety and reliability, along with an enhanced customer experience.

Fluor and Walsh will design and build new elevated tracks, bridges, support structures and existing tracks. Also, they will update 3.2 miles of the signal system as well as construct grade-separated bypass for the Brown Line at Clark Junction. The work will begin in the first quarter of 2019 and is expected to be completed by early 2025.

Although the contract value is not disclosed by the company, Fluor is likely to book its share by the first quarter of 2019 in the Mining, Industrial, Infrastructure & Power segment.

Fluor has a solid track record of receiving awards, which have helped it in generating higher revenues. During the first nine months of 2018, new awards of $10.3 billion in the said segment grew more than three times from the prior-year period.

Notably, shares of Fluor have underperformed its industry in the past six months. The underperformance mainly stemmed from the company's dismal third-quarter results. Fluor's adjusted earnings and revenues missed the Zacks Consensus Estimate by 5.2% and 0.8%, respectively, in the third quarter of 2018.

That said, Fluor remains optimistic about its end markets, including mining. This is because leading indicators of future capital spending like industrial production and capacity utilization are improving in several regions and industries. The company's backlog in the said segment came in at $16.5 billion as of Sep 30, 2018 compared with $10.1 billion a year ago.

The significant increase in backlog stemmed from a whopping new awards count, which is expected to generate higher revenues for the company in the future. Also, Fluor's total new awards recorded an increase of 152.3% in the third quarter, courtesy of improvements in energy and commodity markets, as well as achievements in infrastructure and government business.

Zacks Rank & Stocks to Consider

Currently, Flour carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corp. GLDD , Altair Engineering Inc. ALTR and EMCOR Group, Inc. EME . While Great Lakes currently sports a Zacks Rank #1 (Strong Buy), Altair Engineering and EMCOR both carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Great Lakes, Altair Engineering and EMCOR's 2018 earnings are expected to increase 111%, 23.1% and 20%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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