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Flour Misses Q2 Earnings Estimates

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Fluor Corporation (FLR) reported second-quarter 2013 net earnings of $161 million or 98 cents per share, well below the Zacks Consensus Estimate of $1.01. Quarterly earnings were flat year over year on an absolute basis, while EPS was up 3.1% from 95 cents a share. Profits during the second quarter were primarily driven by growth in the Oil & Gas segment, partially offset by a charge of $17 million related to outstanding embassy claims.

Total Revenue

Total revenue came in at $7.2 billion, compared with $7.1 billion in second-quarter 2012. Top-line growth came on the back of strong performance in the Oil & Gas segment.  

In the said quarter, the company inked contracts worth $7.2 billion. This included $3.3 billion in the Oil & Gas segment and $3.6 billion in the Industrial & Infrastructure segment. Consolidated backlog was $37 billion at quarter-end, down from $37.5 billion in the second quarter of 2012, primarily due to the downturn in the mining and metals market.

Segment Revenue

Revenues from the Oil & Gas segment reported year-over-year growth of 24% to $2.9 billion, while segment profits rose 27% to $107 million. Revenues were primarily driven by increased contributions from upstream and petrochemical projects. Total contracts for the segment were $3.3 billion in the quarter, which included a vast upstream project in Russia and a FEED (front-end engineering and design) award for Sasol’s ethane cracker in Louisiana. Backlog at the quarter-end was $18.7 billion, compared with $19.5 billion at the prior year quarter-end.

Revenues in the Industrial & Infrastructure segment came in at $3.1 billion, down from $3.6 billion in the past year, with segment profit falling to $129 million from $131 million in the second quarter of 2012. The decline in revenues and profits was due to lackluster performance from the mining and metals business line. Deals worth $3.6 billion were signed in the said quarter. This included a contract for the expansion of the Cerro Verde copper project in Peru for Freeport-McMoRan. Backlog at the quarter-end was $16.2 billion versus $21.4 billion in the past year, mainly due to a reduction in mining and metals contracts.

The Government segment reported a year-over-year revenue decline of 23% to $675 million.  The segment’s profit plummeted 65% year over year to $14 million.

 Moreover, new contracts for the Government segment totaled $256 million, down from $769 million reported in second-quarter 2012, driven primarily by the timing of the release of LOGCAP IV task orders. Backlog at the end of the quarter was $531 million, compared with $505 million in the previous year.

Revenues in the Global Services segment remained flat year over year at $154 million, while the segment’s profit fell to $28 million from $38 million in the past year. A decline in both the top and bottom lines was due to reduced contribution from the equipment business line.

Fluor’s Power Group segment reported revenues of $423 million compared with $206 million in the million in the past year, a whopping 105% rise due to progress in gas-fired and solar projects New contracts in the quarter totaled $59 million. The segment’s backlog was $1.6 billion, down from $1.7 billion in the second quarter of 2012.

Balance Sheet & Cash Flow

Cash and marketable securities, including non-current, amounted to $2.6 billion at the quarter-end, while long-term debt was $496.4 million.

Cash provided by operating activities was $242.3 million for the six-month period ended Jun 2013, compared with $81.7 million in the prior-year period.

Revised Outlook

Due to slowdown of growth opportunities in the company’s mining and metals business line as well as unexpected claim charges, the company has narrowed the upper-end guidance for full-year 2013. The company now expects 2013 earnings to be in the range of $3.85–$4.20 per share, down from its earlier guidance $3.85–$4.35.

Fluor currently carries a Zacks Rank #4 (Sell). Stocks in the same sector that are worth a look include Lennox International, Inc. (LII), MDC Holdings Inc. (MDC) and Meritage Homes Corporation (MTH). While Lennox and Meritage both have a Zacks Rank #1 (Strong Buy), MDC Holdings carries a Zacks Rank #2(Buy).

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Read the Full Research Report on LII

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