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Fluor's (FLR) Q3 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

Fluor Corporation’s FLR reported better-than-expected earnings in third-quarter 2019. However, the company’s shares fell nearly 17% on Oct 31. The decline was mainly caused by lower expectation for fourth-quarter margins and softness surrounding the top line.

Fluor reported adjusted earnings of 71 cents per share, beating the Zacks Consensus Estimate of 38 cents by 86.8%. The reported figure increased from the year-ago quarter’s earnings of 55 cents by 29.1%.

Revenues during the quarter totaled $3.94 billion, which missed the consensus mark of $4.69 billion by 16.1%. However, the top line rose 2.5% on a year-over-year basis. The downside was primarily due to lower contribution from the Energy & Chemicals, Infrastructure & Power as well as Diversified Services business.

New Awards & Backlog

In the reported quarter, Fluor's total new awards of $2.63 billion dropped 58.6% on a year-over-year basis. Nonetheless, consolidated backlog during the quarter came in at $30.3 billion, up from $30 billion in the year-ago quarter.

Segment Discussion

Energy & Chemicals segment’s revenues fell 15.3% year over year to $1,611.6 million. During the quarter, the segment’s profit came in at $84.9 million compared with $50.2 million in the year-ago quarter. Segmental margin was 5.3%, up 270 basis points (bps) from 2.6% in the prior-year quarter.

Fluor Corporation Price, Consensus and EPS Surprise

 

Fluor Corporation Price, Consensus and EPS Surprise

Fluor Corporation price-consensus-eps-surprise-chart | Fluor Corporation Quote

 

New awards came in at $256.3 million, down from $644.1 million in the year-ago quarter. Backlog at the end of the quarter was $13.7 billion compared with $11.4 billion in the year-ago period.

Revenues in the Mining & Industrial segment totaled $1,374 million, up 41.2% on a year-over-year basis. The segment’s margin was 4.1% during the quarter, up 200 bps from 2.1% in the year-ago quarter. The uptick was led by increased project execution for several mining projects and successful resolution of a customer dispute.

New awards came in at $118.8 million, down from $4,286.8 million in the prior-year quarter. Backlog at the end of the quarter was $6.2 billion compared with $9.8 billion in the year-ago period.

Revenues in the Infrastructure & Power segment totaled $392.5 million, down 4.8% on a year-over-year basis. The segment’s margin was 0.3% compared with 24.8% in the year-ago quarter on continuous execution of lower margin projects that were revised in the second quarter.

The segment booked new awards worth $1,992.7 million, up from $1,076.9 million in the year-ago quarter. Backlog at the end of the quarter amounted to $7.7 billion compared with $6.7 billion in the year-ago quarter.

Diversified Services revenues dipped 0.9% on a year-over-year basis to $521.7 million. Segment margin contracted 220 bps to 2.1% in the quarter. The downside was caused by lower volumes in the operations and maintenance business as well as divesture of equipment business in Mexico.

New awards totaled $259.8 million, down from $336 million in the year-ago quarter. Nevertheless, quarter-end backlog increased to $2.4 billion from nearly $2 billion in the prior-year quarter.

The Other segment, which now includes NuScale and the Radford and Warren government projects, reported revenues of $37.9 million. The segment booked new awards worth $0.5 million. Backlog at the end of the quarter amounted to $265.1 million compared with $156.4 million in the prior-year quarter.

Liquidity & Share Repurchases

As of Sep 30, 2019, Fluor had cash and marketable securities of $1,853.0 million, down from $1,979.6 million at the end of 2018. Long-term debt at the end of the third quarter declined to $1,636.9 million from $1,661.6 million on Dec 31, 2018. Cash provided by operating activities was $66.9 million during the first nine months of 2019 versus cash used in operations of $11.3 million in the year-ago period.

Guidance

Although the company withdrew all of its previously-issued guidance for 2019 during the second quarter earnings release, it provided margins guidance for the fourth quarter. Margins are anticipated to be 4-5% for Energy & Chemicals and Diversified Services units, respectively. Also, margins are projected to be 2% for both Mining & Industrial and Industrial & Power segments.

Zacks Rank & Peer Releases

Fluor, which shares space with Jacobs Engineering Group Inc JEC in the Zacks Construction Sector, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jacobs has an impressive long-term earnings growth rate of 11%.

Quanta Services Inc PWR reported solid results in third-quarter 2019. The top and the bottom line surpassed the respective Zacks Consensus Estimate and increased year over year. It reported adjusted earnings of $1.14 per share, which beat the consensus mark of $1.04 by 9.6%.

KBR, Inc KBR reported strong results in third-quarter 2019. The top and the bottom line beat the respective Zacks Consensus Estimate and improved year over year on continued solid organic growth. Its adjusted earnings came in at 45 cents per share, beating the Zacks Consensus Estimate of 44 cents by 2.3%. The reported figure also increased 4.7% year over year.


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