When an activist investor takes a stake in a company, it usually has a litany of complaints. Often it accuses the target corporation of having troubled operations and an incompetent CEO.
But that’s not how renowned activist investor Starboard Value is approaching Fluor (NYSE: FLR), a major player in engineering, procurement, construction, and project management services. It has a market capitalization of $8 billion.
Starboard, which executed successful campaigns for change at Pfizer (NYSE: PFE) and Salesforce (NASDAQ: CRM), thinks highly of Fluor. The company acts as a one-stop partner for companies doing large, complex engineering, construction and energy projects, Starboard notes.
“Fluor is unique as one of the few companies capable of delivering true end-to-end EPCM (engineering, procurement and construction management) solutions across industries,” the activists wrote in a report.
Fluor serves a diversified, attractive array of end markets. That includes data centers, mining, infrastructure, life sciences, and power companies.
Ups and downs
But the company has had some ups and downs in the past 15 years, with its stock appreciating only at an annualized rate of 0.51% during that period, according to Morningstar.
The main problem: In the 2010s, Fluor’s prior management “aggressively pursued a high-risk
strategy in an attempt to drive growth,” Starboard said. It chased “risky, fixed-priced contracts and acquired non-core businesses.” Those contracts were either bid or executed poorly, leading to significant cost overruns. That sank investor confidence and Fluor’s stock too.
But things changed under David Constable, who served as CEO of Fluor from 2021 until April of 2025. “Fluor’s new management team began rebuilding the culture and shifting toward a more sustainable model focused on lower-risk reimbursable contracts, which now account for 80% of Fluor’s contract mix,” Starboard explains.
The company also benefited from its decision to stay in what had been an intensively competitive construction market, as others exited. Fluor now has construction projects under far more favorable terms than in the 2010s. It’s one of the few remaining full-service EPCM providers.
Looking at the big picture, “Fluor has diligently worked through its backlog of problem projects, substantially reducing this long-standing earnings drag,” Starboard said. “The work is not yet complete, but Fluor’s risk profile is no longer out of line with peers.” The company is now well-positioned to focus on “healthy backlog growth.”
Strong end markets
Fluor can take advantage of growth in its end markets, such as infrastructure, life sciences, mining, semiconductors, data centers, liquified natural gas, power generation and energy transition.
That helps explain why the stock price has gained an annualized 31% over the past five years. But the last year hasn’t been kind to Fluor, with its shares dropping 13.5%.
Earnings have sagged amid macroeconomic uncertainty, including tariffs. Revenue dropped 6% in the second quarter from a year earlier, adjusted EBITDA plunged 42%, and Fluor cut its earnings forecasts for full-year 2025.
The best move for Fluor would be to jettison its 39%, $4 billion stake in NuScale, a fast-growing designer and marketer of small, modular nuclear reactors, Starboard says. NuScale’s stock has soared 94% so far this year, boosted by energy demand from data centers. Fluor could execute a tax-free spinoff, open-market sales or an exchange offer to liquidate its stake.
“A separation of Fluor’s NuScale stake could unlock meaningful value,” Starboard says. “The market is significantly undervaluing Fluor’s core business.”
Perhaps Fluor will put Starboard’s suggestion to the test. It already sold $605 million of its NuScale holdings in August. Companies that split up often thrive, as is the case with General Electric. But obviously there’s no guarantee of success.
Comments