Fluor Corporation's Turnaround: Betting on NuScale SMRs and Diversification for a Nuclear-Fueled Future

Fluor Corporation (FLR) has long been synonymous with large-scale engineering projects, but its reliance on volatile oil-and-gas markets has left investors wary. Now, the company is pivoting toward high-margin, secular-growth opportunities in small modular reactors (SMRs) and infrastructure—strategic shifts that could finally unlock its turnaround potential. Let's dive into the data and trends supporting this thesis.

The Strategic Shift: NuScale SMRs as the New Growth Engine

Fluor's most promising move is its partnership with NuScale Power, a leader in SMR technology. SMRs are compact, scalable nuclear reactors designed to provide carbon-free energy at a fraction of the cost and risk of traditional nuclear plants. Fluor's role as the prime contractor for the RoPower Doicești project in Romania—a 462 MW SMR plant—highlights its commitment to this space.

The NuScale opportunity is twofold:
1. High Margins: SMR projects typically carry margins of 10-15%, far above the 5-7% in traditional oil/gas projects.
2. Regulatory Momentum: NuScale's design is slated for U.S. Nuclear Regulatory Commission (NRC) approval by July 2025, a critical milestone enabling commercial deployment by 2030.

Fluor's Q1 2025 results underscore progress: NuScale's revenue jumped to $13.4 million (vs. $1.4 million in 2024), driven by Fluor-led engineering work on the RoPower project. This is just the start—NuScale's partnership with supply chain partner Doosan Enerbility has already secured long-lead materials for six modules, signaling scale-up readiness.

Diversification Beyond Oil: Infrastructure and Renewables

Fluor's pivot isn't just about SMRs. The company is expanding into clean energy infrastructure, including hydrogen production and grid modernization, while reducing its exposure to oil-and-gas volatility. Diversification is paying off:

• Revenue Mix: In Q1 2025, non-oil/gas projects contributed over 60% of revenue, up from 45% in 2020.
• Pipeline Strength: The company's backlog includes $24 billion in projects tied to SMRs, renewables, and critical infrastructure—up 15% year-over-year.

FLR's stock has lagged due to legacy risks, but the diversification story is gaining traction.

Free Cash Flow Recovery: A Key Catalyst

While Fluor reported a Q1 2025 net loss of $241 million (due to equity-method losses from NuScale), the path to free cash flow (FCF) stability is clearer:
- Operating Cash Flow: Though negative $286 million in Q1, this reflects upfront SMR project costs. As these projects ramp up, operating cash flow should rebound.
- Debt Management: Long-term debt remains stable at $1.09 billion, with no near-term maturities. Fluor also retired $163 million in debt during Q1.
- Share Repurchases: The company spent $142 million buying back shares in Q1, reducing outstanding shares to 166 million—a 1.5% dilution reduction.

Analysts project FCF to turn positive by 2026 as SMR projects deliver.

Legal Risks: Overhang, but Manageable

Fluor faces two major legal battles:
1. Santos Ltd. Litigation: A $790 million claim by an Australian partner. While a court ruling is pending, Fluor argues the case is overblown and has set aside reserves.
2. North Texas Tollway Authority (NTTA): A $227 million claim over a highway project. Fluor is contesting liability and seeking subcontractor indemnification.

While these cases remain unresolved, their impact is partially priced into the stock. The $2.43 billion cash balance (as of March 2025) provides a buffer, and management has stated they expect minimal incremental charges beyond existing reserves.

The Investment Thesis: Buy the Dip

Fluor trades at just 6.2x forward EV/EBITDA, a discount to peers like Bechtel and AECOM. The stock's depressed valuation reflects lingering legal concerns and the SMR timeline's uncertainty. However, the catalysts are clear:
- NRC Approval (July 2025): A green light would unlock SMR orders, driving FCF and revenue growth.
- Legal Resolution: A Santos ruling by year-end could remove the overhang.
- Diversified Pipeline: SMRs and renewables are insulated from oil price swings, offering stable margins.

Risk-Adjusted Upside: At current prices, FLR offers a 30-40% upside if it delivers on its SMR targets and resolves legal issues favorably. Investors should watch for catalysts in Q3 (NRC decision) and Q4 (Santos ruling).

Conclusion

Fluor's turnaround hinges on executing its SMR strategy and navigating legacy risks. The company's shift to high-margin, secular-growth sectors like nuclear and renewables is a compelling long-term story. With a cheap valuation and clear catalysts ahead, now is a good time to buy FLR on dips—provided investors can stomach short-term volatility tied to legal outcomes.

Final Note: Monitor the NRC ruling and Santos litigation closely. Positive developments here could spark a multi-year outperformance cycle.