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Fluor (FLR) Down 2.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·6 min read

A month has gone by since the last earnings report for Fluor (FLR). Shares have lost about 2.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Fluor due for a breakout? 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 catalysts.

Fluor (FLR) Reports Third-Quarter 2020 Results

Fluor Corporation reported third-quarter earnings of 14 cents per share, which missed the Zacks Consensus Estimate of 30 cents by 53.3% and decreased 80.3% year over year. Notably, no material project execution charges were recorded in the first three quarters of 2020. Also, with the third-quarter earnings release, the company is now current with all financial filings and debt requirements.

Revenues

Revenues of $3,803.2 million also missed the consensus mark of $3,847 million and decreased from the year-ago level of $4,628.6 million.

Fluor's total new awards of $1.75 billion declined from $3.76 billion in third-quarter 2019. Consolidated backlog at quarter-end came in at $27.8 billion, down from $31.9 billion in 2019.

Segment Details

Energy & Chemicals segment’s revenues declined 17.1% year over year to $1,336 million. The segment generated operating income of $94.9 million, up from $84.7 million a year ago. The improvement was mainly due to increased activity on a liquefied natural gas project and favorable foreign currency transaction gains.

New awards came in at $141.2 million, down from $256.3 million a year ago. Backlog at third quarter-end was $11.6 billion compared with $14.1 billion at 2019-end.

Revenues in the Mining & Industrial segment totaled $920.9 million, down 33% on a year-over-year basis due to deferred execution activities on a few large mining projects due to the COVID-19 pandemic. Segment profit came in at $18.2 million for the quarter, down from $56.9 million a year ago.

New awards came in at $268.2 million, up from $118.8 million a year ago. Backlog at second quarter-end was $4.8 billion compared with $5.4 billion at 2019-end.

Revenues in the Infrastructure & Power segment totaled $386.5 million, down 1.5% on a year-over-year basis. Lower margin contributions from certain infrastructure projects for which charges were recognized during 2019 continue to adversely impact near-term segment profit margin. The segment generated operating income of $6.4 million versus $0.9 million a year ago.

The segment booked new awards worth $682.6 million, down from $1.99 billion a year ago. Backlog at third quarter-end amounted to $5.6 billion compared with $6.1 billion at 2019-end.

Revenues in the Government segment totaled $753.7 million, up 4.9% on a year-over-year basis. The segment generated operating income of $25.7 million, up from $22.4 million a year ago.

The segment booked new awards worth $187.8 million, down from $1.13 billion a year ago. Backlog at third quarter-end amounted to $3.4 billion compared with $3.6 billion at 2019-end.

Diversified Services (including certain retained AMECO operations) revenues dipped 29% on a year-over-year basis to $370.3 million due to lower volumes in the Stork and staffing businesses resulting from reduced operations or restricted access to customer sites due to the COVID-19 pandemic. It reported segment income of $7.1 million for the quarter, down from $10.5 million a year ago.

New awards totaled $468.5 million, up from $259.8 million a year ago. Backlog decreased to $2.3 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 $35.8 million, up from $10.6 million a year ago. Backlog at quarter-end amounted to $145.2 million, down from $244 million at 2019-end. It reported operating loss of $22.9 million compared with a loss of $96.6 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 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 financial information in continuing operations beginning first-quarter 2020. It expects to complete the AMECO equipment business sale within first-half 2021.

During third-quarter 2020, Fluor sold all assets of the AMECO Jamaica business for $18 million net of working capital and recognized a loss of $1 million.

At the end of September 2020, Fluor’s cash balance (including Marketable securities) was $2.1 billion, up from $1.98 billion at June-end. Fluor paid $28.7 million in dividends during the first nine months of 2020.

Guidance

Owing to volatility in commodity prices and global disruption from the COVID-19 pandemic, Fluor has suspended its 2020 guidance. That said, the company expects to report fourth-quarter 2020 results and issue its 2021 guidance in February 2021.

The company expects its cash balance to remain $2 billion through 2020-end. The COVID-19 pandemic continues to impact Fluor’s business as clients are deferring capital investment decisions, and the pandemic has slowed down its ability to fully staff and execute projects.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -28.36% due to these changes.

VGM Scores

Currently, Fluor has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Fluor has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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