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Fluor (FLR) Up 29.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·6 min read

It has been about a month since the last earnings report for Fluor (FLR). Shares have added about 29.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Fluor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Fluor (FLR) Reports Second-Quarter 2020 Results

Fluor Corporation reported second-quarter net loss from continuing operations of $27 million, or 19 cents per share, compared with $397.4 million or $2.84 a year ago. Fluor highlighted that results for the second quarter reflected operational impacts from a severe downturn in the economy related to the COVID-19 pandemic. There were no material project adjustments in the quarter.

Revenues

The company recorded second-quarter revenues of $4,091 million, down 1.3% from $4,146.4 million a year ago.

Fluor's total new awards of $2.2 billion declined from $2.4 billion in the second quarter of 2019. Consolidated backlog at quarter-end came in at $29 billion, down from $31.9 billion in 2019.

Segment Details

Energy & Chemicals segment’s revenues grew 6.9% year over year to $1,495.9 million for the quarter owing to the ramp up of project execution activity for a liquefied natural gas project, partially offset by a reduction in activities for two large chemicals projects nearing completion. The segment generated operating income of $41 million against a loss of $222 million a year ago.

New awards came in at $197 million, down from $731.7 million a year ago. Backlog at second quarter-end was $12.4 billion compared with $14.1 billion at 2019-end.

Revenues in the Mining & Industrial segment totaled $1,013 million, down 20.8% on a year-over-year basis due to a decline in the volume of project execution activities for a large life sciences project and two mining projects nearing completion, as well as the suspension of site activities for a large mining project in South America due to the COVID-19 outbreak. Segment profit came in at $29.8 million for the quarter, down from $44.7 million a year ago.

New awards came in at $729.2 million, up from $493.5 million a year ago. Backlog at second quarterend was $5.2 billion compared with $5.4 billion at 2019-end.

Revenues in the Infrastructure & Power segment totaled $474.7 million, up 106.9% on a year-over-year basis, attributable to an increase in project execution activities for several infrastructure projects. The segment generated operating income of $3.5 million against a loss of $167.2 million a year ago.

The segment booked new awards worth $61.3 million, up from $16.4 million a year ago. Backlog at second quarter-end amounted to $5.2 billion compared with $6.1 billion at 2019-end.

Revenues in the Government segment totaled $701.8 million, down 2.8% on a year-over-year basis due to completion of the Magnox project in the United Kingdom during third-quarter 2019. The segment generated operating income of $10.5 million, down from $26.4 million a year ago.

The segment booked new awards worth $941.3 million, up from $543.1 million a year ago. Backlog at second quarter-end amounted to $3.8 billion compared with $3.6 billion at 2019-end.

Diversified Services (including certain retained AMECO operations) revenues dipped 25.6% on a year-over-year basis to $382.9 million due to lower volumes in the Stork business and staffing business resulting from reduced operations or restricted access to customer sites due to the COVID-19 pandemic. It reported segment loss of $4.8 million for the quarter against a profit of $3 million a year ago.

New awards totaled $262 million, down from $573.8 million a year ago. Backlog decreased to $2.2 billion from $2.5 billion at 2019-end.

The Other segment — which now includes NuScale and the Radford and Warren government projects — reported revenues of $22.7 million, up from $3 million a year ago owing to increased project execution activities for both Radford and Warren projects. Backlog at quarter-end amounted to $178.5 million, down from $244 million at 2019-end. It reported operating loss of $19.3 million compared with a loss of $85 million a year ago.

Other Updates

During third-quarter 2019, Fluor management planned to divest the company’s government and AMECO equipment businesses. Hence, the results of the government and AMECO businesses have been presented as earnings from discontinued operations for 2019. Meanwhile, in February 2020, Fluor announced its intention to retain the government business and reflect its financial information in continuing operations beginning first-quarter 2020. It expects to complete the AMECO equipment business sale within first-half 2021.

At the end of June 2020, Fluor’s cash balance (including Marketable securities) was $1.98 billion and the company expects the cash balance in that range through 2020-end. Fluor paid $28.7 million in dividends during the first six months of 2020.

Guidance

Owing to volatility in commodity prices and global disruption from the COVID-19 pandemic, Fluor has suspended its 2020 guidance.

As of Jun 30, 2020, the company’s financial covenants limit its borrowings to approximately $632 million under the committed credit facilities. Notably, no amounts were drawn.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -21.11% due to these changes.

VGM Scores

Currently, Fluor has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Fluor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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