WOR was the only MM Active Growth Portfolio stock to retreat on Tuesday. Overall, this was good news, but we must ask ourselves why. We believe the problem lies with overseas peer Fluor Corp (FLR US), which delivered a disappointing second-quarter result last week which fell well short of expectations, sending the stock tumbling over 30%.
They reported:
- Revenue of $3.98 billion, -5.9% YoY and well below $4.61 billion estimates.
- Adjusted EPS of 43c v 85c YoY, also well below 56c estimates.
Management slashed its 2025 adjusted earnings guidance to EPS of $US1.95–2.15 from a previous range of $2.25–2.75, citing project delays, subcontractor design issues, and clients pulling back on capital spending due to macro uncertainty. The company also disclosed a $US54 million net cost impact tied to overruns and design errors at three key infrastructure projects and diminished new contract awards—no good news anywhere. Here lies the concern with WOR, its business is very similar to FLR’s.
Fluor and Worley are both global engineering and project management companies that serve energy, resources, and infrastructure sectors. Each focuses heavily on oil & gas, chemicals, mining, and increasingly, energy transition projects like hydrogen, carbon capture, and renewables. While Fluor is US-based and larger in scale, Worley shares a similar business model, with both companies providing end-to-end services across the project lifecycle—from design and procurement to construction and maintenance.
- After FLR demonstrated the risk in the space last week, we are considering our WOR position ahead of its result on the 27th.
WOR hasn’t recovered from the April sell-off in global markets even after it delivered a very solid 1H result plus a supportive $500mn buyback. As we often write we don’t like it when stocks cannot advance on “good news”. Our confidence in this position has slowly waned over the last month or so with FLR’s result raising some red flags within the space, especially from a risk/reward perspective.
- We feel that WOR is a coin-toss into its result – MM is long WOR in its Active Growth Portfolio.
MM is considering cutting our WOR position
Add To Hit List
