Fluor Engineering has many positive attributes.  FLR has a P/E of 12 and an almost guaranteed profit for the next 12 months due to the contractual backlog that is inherent to engineering construction companies.  Its Revenue / backlog is $23B while its Market Cap is only $8.6B for a very low P/S ratio of 0.37. This while the ROE is 26.71%.  Engineering construction is a high margin business. (all numbers as of October 2, 2009)

The long term outlook for engineering construction is very good globally with infrastructure and natural resource processing required in Emerging Markets and as a form of stimulus in developed markets. FLR was at 100 in June 2008 and tracks very close with energy and materials stocks as that is where FLR does most of its projects. Its five year low was 28.60 on Nov 20 during the panic. I can't imagine prices getting back to that level again:

Take a look at this ITM call spread. Underlying: FLR at $47.60 (Friday close)

Buy APR '10 $40 CALL (FLRDH) for $10.50

Sell APR '10 $65 CALL (FLRDM) for $1.10

Net Cost = $9.40 per contract (100 shares

Upside is 166% Return in 6.5 months (note that the time premium degrades closer to expiration which causes return to decrease)

Downside is 40 - 1.10 = 38.90; return = zero;

Any close above $49.40 at April expiration will be profitable

A $9400 investment would buy 10 contracts and allow the possibility of a $15,600 return

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To provide a little better downside protection in return for giving up some upside, go deeper in the money to the $35 CALL:

Buy APR '10 $35 CALL (FEMDG) for $14.60

Sell APR '10 $60 CALL (FLRDL) for $1.90

Net Cost = $12.70 per contract (100 shares)

Upside is 97% Return in 6.5 months (note that the time premium degrades closer to expiration which causes return to decrease)

Downside is 35 - 1.90 = 33.10; return = zero;

Any close above $47.70 at April expiration will be profitable (basically, just above the current price)

A $13,970 investment would buy 10 contracts and allow the possibility of a $13,530 return

Another possibility is to just buy the shares outright and then sell a $60 April Call against them for $1.90. But that reduces the return and really doesn't provide much benefit in reduced risk. Chances are the time premium on option 1 of $2 between now and April will be rewarded. It is not much to pay for the chance at a 100% return in 6 months

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I attribute recent price weakness (past two weeks) to profit taking.  The past nine months had seen an almost 100% price rally from the November low.  But fundamentally, FLR is very sound.  If you believe as I do, that global growth will continue, especially in the Emerging Markets, FLR is very well positioned regardless of problems in the American economy.

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