Worley Benefits from Fluor's Weak Performance; Goldman Sachs Maintains Buy Rating

Overview

This report analyzes Fluor Corporation's (not covered) Q1 2026 performance to assess its implications for Goldman Sachs-covered Worley Ltd. (WOR.AX). As a global engineering and construction firm, Fluor overlaps with Worley in the energy, chemicals, and resources sectors. The core conclusion is that Fluor's decline in new orders and revenue reflects weak non-resources demand, but Worley holds a relative advantage in energy solutions, leading Goldman Sachs to maintain its Buy rating.

Core views

Fluor's total Q1 revenue decreased 8% year-over-year, primarily dragged down by a 42% plunge in the Energy Solutions segment, partially offset by a 13% revenue increase in the Urban Solutions segment. Regarding new orders, group-wide new orders fell 54% year-over-year; Urban Solutions new orders dropped 60% to approximately $2 billion, while Energy Solutions new orders fell 32% to $213 million. Management noted that new order margins improved by 200 basis points compared to current backlog margins, but the decline in total new orders and backlog suggests weak non-resources demand. Segment performance showed significant divergence: Urban Solutions backlog accounted for 74% of the total, but EBIT margins fell from 3.3% to 0.2% due to rising costs on mining projects in the Americas. Energy Solutions saw profitability improvements driven by favorable settlements on three projects, with FY26 margin guidance raised from 4%-5% to 5%-6%. Management expects large new orders to concentrate in the second half of 2026. Implications for Worley: Fluor's Energy Solutions (overlapping with Worley's energy and chemicals businesses) and Urban Solutions (overlapping with Worley's resources business) collectively accounted for 30% of Fluor's total revenue in Q3 2025. Fluor's progress in nuclear, LNG, and natural gas power generation (e.g., Canada LNG Phase II, California gas compression projects) provides a positive reference for Worley, but weak demand in the resources sector may impact Worley's resources segment performance.

Analysis framework

Goldman Sachs employs a cross-company comparative analysis, deriving the industry environment for Worley from Fluor's performance. First, it identifies overlapping business areas between the two companies (energy, chemicals, resources), then compares changes in segment revenue, new orders, and margins. On the valuation front, a hybrid valuation method is used for Worley, weighting DCF (WACC 9.6%, perpetual growth rate 2.5%) and EV/EBIT (12.3x) at 50% each, resulting in a target price of A$16.00. The analytical logic emphasizes: 1) inferring common industry pressures from Fluor's weak non-resources demand; 2) using segment data to pinpoint Worley's areas of strength; 3) quantifying the target price via valuation models.

Methodology notes

• Valuation MethodSOTP Segment Valuation

  Hybrid DCF and EV/EBIT valuation for Worley

  Applying different valuation methods to different business segments of a company (e.g., EV/EBIT for the energy segment, DCF for stable cash flow businesses) and summing them to derive the overall valuation. In this report, DCF and EV/EBIT are each weighted at 50%, reflecting Worley's business diversification.

• Industry/Sector Analysis FrameworkSupply and Demand Framework

  Judging demand sentiment through changes in new orders and backlog

  Demand in the engineering industry is often measured by new order growth rates and backlog size. Fluor's sharp decline in new orders and reduction in backlog suggest weak industry demand, particularly in the non-resources sector.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Worley Ltd. (AU.WOR)

  Overlaps with Fluor in energy, chemicals, and resources; Fluor's performance provides an industry reference

  Strengths

  Energy Solutions segment overlaps with Fluor, benefiting from progress in nuclear and LNG projects

  Weaknesses

  Resources segment may be dragged down by weak demand in Fluor's Urban Solutions

  Risks

  Client project delays, orders falling short of expectations, margin fluctuations

Key data

• Fluor Total Revenue YoY Change-8%Q1 2026, dragged down by the Energy Solutions segment
• Fluor New Orders YoY Change-54%Group-wide new orders declined, with the Mission Solutions segment being the exception
• Urban Solutions New OrdersApprox. $2 billionDown 60% year-over-year, including metal projects in the Middle East, pharmaceutical facilities, and mining infrastructure in Chile
• Energy Solutions New Orders$213 millionDown 32% year-over-year, involving nuclear, LNG, and natural gas power generation projects
• Worley Target PriceA$16.00Based on 50% DCF (WACC 9.6%) + 50% EV/EBIT (12.3x)

Impact & implications

The report argues that Fluor's weak performance reflects pressure on demand in the non-resources sector of the engineering industry, but structural opportunities remain in the energy sector (nuclear, LNG, natural gas power generation). For Worley, its overlapping energy and chemicals businesses may benefit from Fluor's order progress in these areas, but the resources segment needs to guard against the risk of declining demand. Goldman Sachs maintains a Buy rating on Worley, implying confidence in the resilience of its energy business.

Risks

• Potential delays in client projects
• Orders or total revenue below expectations
• Changes in margin profile

What to watch

• Execution of large new orders in the second half of 2026
• Progress on nuclear and LNG projects in the Energy Solutions segment
• Margin recovery progress in the Urban Solutions segment