Is Fluor a Strategic Long-Term Play or Economic Cycle Victim?

Fluor Corporation stands at an interesting crossroads. While recent developments around its NuScale Power investment have garnered attention, the real question for investors centers on whether Fluor’s fundamental business model can weather the inevitable economic storms ahead. Understanding what you’re actually investing in requires looking beyond the headline-grabbing news.

The Core Challenge: Understanding Fluor’s Cyclical Exposure

The construction and engineering industry operates under immutable economic laws. Fluor, as one of the sector’s largest players, cannot escape this reality. When economies expand, corporations and governments eagerly fund massive infrastructure and construction projects. When recessions hit and capital becomes scarce, those same projects get shelved, postponed, or canceled altogether. This boom-bust pattern isn’t a Fluor-specific problem—it’s baked into the entire construction industry DNA.

What this means for shareholders: Your investment in Fluor will likely experience significant volatility tied directly to broader economic conditions. If you lack the stomach for witnessing your stake rise and fall with macroeconomic cycles, Fluor probably isn’t your ticker. This cyclical nature has proven historically difficult to overcome, and management initiatives, while helpful, cannot fundamentally alter this industry dynamic.

Operational Improvements in Fluor’s Contract Strategy

To management’s credit, they’ve recognized past vulnerabilities and are taking action. The company previously relied heavily on fixed-price contracts—an arrangement that left Fluor exposed to cost overruns when construction projects exceeded budgets. That was a painful lesson.

Today’s trajectory shows marked improvement: 82% of Fluor’s existing backlog now uses reimbursable contracts, where costs get passed along to clients. Even more impressively, virtually all new contract signings follow this model—99% of the $3.4 billion in contracts secured during the third quarter of 2025 carried reimbursable terms. This structural shift makes Fluor’s earnings more predictable and less exposed to project-specific risks. It’s a genuine operational upgrade that strengthens the business foundation.

NuScale: Understanding the Temporary Revenue Event

Fluor’s early investment in NuScale Power, a developer of small modular nuclear reactors (SMRs), created buzz in recent months. The partnership showed promise—Fluor and NuScale are collaborating on potential projects like a Romanian utility’s evaluation of a six-reactor SMR plant.

However, investors should view this investment through a realistic lens. During late 2025, Fluor monetized part of its NuScale stake, generating $605 million in net proceeds. The company plans to liquidate its remaining position throughout 2026. While $605 million represents meaningful capital, this monetization event is exactly what it appears to be: a one-time cash injection that temporarily strengthens Fluor’s balance sheet but doesn’t fundamentally alter the company’s core business trajectory or long-term earnings potential.

Making Your Investment Decision

Here’s the straight assessment: Fluor executes its engineering and construction work competently. Management is implementing smart operational reforms. Yet competence and improvement don’t automatically translate into stock market wealth creation for long-term investors.

Before committing capital to Fluor, honestly evaluate whether you can tolerate significant fluctuations in stock price that will likely mirror economic cycles and market downturns. If economic sensitivity keeps you up at night, redirect your focus toward companies with more stable, recession-resistant revenue streams.

The Motley Fool analyst community evaluated the opportunity and determined other candidates offered superior risk-adjusted return potential. That assessment underscores an important reality: solid companies don’t always make solid investments for every portfolio. Know what you’re buying and whether your risk tolerance genuinely aligns with it.