The Future of Nuclear Power: Insights into Fluor Corporation and NuScale Power
Overview of Fluor Corporation’s Role in the Nuclear Industry
Fluor Corporation is an engineering and construction powerhouse with a significant stake in the burgeoning small modular reactor (SMR) market, owning nearly 40% of NuScale Power Corporation. Although NuScale Power may not see profitability for several years, Fluor’s financial performance tells a different story. The stock is not only profitable but is also attracting attention due to its affordability, with earnings priced at under seven times earnings.
NuScale Power: Opportunities and Challenges Ahead
NuScale Power stands at the forefront of the SMR initiative, poised to reshape energy consumption. Despite its potential, the company will likely remain unprofitable until 2030, with its revenue currently hovering around $64 million annually. This delayed profitability raises questions about the viability of investing in SMR-centric stocks without a broader strategy.
Trends in Nuclear Power Stocks
2025 has shown a promising trend for nuclear power stocks, with major players like Nano Nuclear Energy, NuScale, and Oklo enjoying substantial growth. This surge can be attributed to several factors, including favorable governmental policies. President Donald Trump’s executive orders in May promoting American nuclear power have bolstered investor confidence. The growing energy demands of artificial intelligence (AI) data centers further underline the need for robust, reliable energy sources, making nuclear energy an attractive option.
The Downside of SMR Stocks
Despite the optimistic backdrop, the reality for SMR stocks is less rosy. Over the past six weeks, shares of Nano Nuclear have plummeted 46%, Oklo is down nearly 48%, and NuScale has faced the worst fate, shedding 62% of its value from its recent highs. Concerns about their lengthy trajectory toward profitability have left many investors skeptical, particularly given that none of these companies will likely turn a profit before 2030.
The Allure of Fluor Corporation
In contrast to its ambitious JV partner, Fluor Corporation already operates profitably. Notably, the engineering firm is unique in that it builds large-scale nuclear plants, offering a stable revenue model. Fluor’s 38.9% stake in NuScale could be valued at approximately $2.3 billion, accounting for more than a third of its own $6.6 billion market capitalization. Importantly, Fluor has substantially more cash than debt on its balance sheet, further bolstering its financial health.
The Economics of Fluor’s Valuation
Examining Fluor’s valuation reveals an intriguing narrative. Its enterprise value stands at around $2.5 billion when considering the significant cash reserves and its stake in NuScale. With earnings of $3.4 billion reported over the last year, this translates to an enterprise-value-to-earnings ratio below 1—an astonishing valuation for a company in its sector. Analysts predict that Fluor will realize approximately $360 million in genuine profit next year, with an expected growth rate of around 36% over the next three years.
Potential Investor Considerations
For investors considering a modest investment in Fluor, the compelling data indicates potential upside. At an effective enterprise value of just $2.5 billion, Fluor’s stock appears attractively priced when compared to anticipated earnings growth, leading to a starkly favorable EV-to-earnings ratio.
In essence, while Fluor’s stake in NuScale might be shrinking, creating short-term headwinds for the parent company, the future may not be so bleak. Global momentum is shifting towards the construction of larger nuclear plants, with the U.S. Department of Energy recently announcing plans supported by Japanese investments for constructing ten new large nuclear power plants. This scenario could translate into significant new contracts for Fluor, offering an alternate path to growth.
The Bigger Picture: Navigating Investor Sentiment
Before diving deeper into Fluor as an investment option, it is worth noting that stock recommendations can vary widely. Fluor didn’t make the cut in recent analyst recommendations for stocks expected to provide substantial returns. Nevertheless, for investors willing to navigate the complex nuclear landscape, Fluor may still be an intriguing choice without delving exclusively into the less-proven SMR stocks.
Exploring these dynamics within the nuclear sector reveals fertile ground for potential investment, characterized by a balance of risk and opportunity. By keeping an eye on both Fluor and the broader market trends, investors can make informed choices as the energy landscape continues to evolve.
