The WorleyParsons Limited (ASX: WOR) share price has rebounded from an early drop after it announced a new engineering, procurement and construction management (EPCM) contract awarded by Rio Tinto Ltd (ASX: RIO).
What did WorleyParsons announce?
WorleyParsons announced that it has been awarded a contract to perform EPCM services for Rio Tinto's Koodaideri iron ore mine in the Pilbara region of Western Australia.
The award of the EPCM contract follows the completion of the detailed engineering study for the Koodaideri project.
The project will be executed over a three-year period from the Perth project office with additional support teams on the mine and rail locations.
Management said that WorleyParsons will use data-centric engineering processes to also produce a digital asset for Rio Tinto in an expansion of one of its key strategic relationships.
Are WorleyParsons or Rio Tinto in the buy zone?
The WorleyParsons share price is up 29% year-to-date (YTD) and announced a half-year underlying net profit after tax (NPAT) of $98.4 million, up 25.8% on the prior corresponding period (pcp) in February 2019.
The group's share price plummeted 41.4% in Q4 2018 to close out the year at just $11.42 per share in line with fellow engineering, procurement and construction (EPC) providers Seven Group Holdings Ltd (ASX: SVW) and Emeco Holdings Ltd (ASX: EHL).
The EPCM space has been particularly volatile with intense competition driving profit margins lower and requiring companies to operate with a wafer-thin equity buffer on many projects.
While I'm not bullish on the EPCM contractors, the likes of Rio Tinto could certainly be in the buy zone. Rio and fellow blue-chip miners including BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Ltd (ASX: FMG) have propped up the S&P/ASX200 Index (ASX: XJO) in 2019.
The Rio Tinto share price has rocketed 31.3% higher so far this year on the back of a commodities rebound and strong earnings numbers.
I think there is potential for Rio to continue to climb and I'm a big fan of the company's strong earnings per share (EPS) amongst its ASX200 peers, with the stock trading on a P/E ratio of just 9.1x earnings.
For those who like stable dividends, Rio might just provide the best of both worlds in terms of growth and income over the next 12-18 months.
For those who want to find the next hot growth company, this top-rated stock could boost portfolio gains as it continues to soar in a $22 billion industry.
