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Fluor's (FLR) Shares Decline on Q1 Loss and Revenue Miss

Zacks Equity Research

Fluor Corporation’s FLR shares declined more than 26% in the pre-market trading session, following first-quarter 2019 results. Both the top and bottom lines missed the Zacks Consensus Estimate.

The company reported adjusted loss of 14 cents per share in the quarter that fared unfavorably with the Zacks Consensus Estimate of earnings of 54 cents. The reported figure also deteriorated significantly from earnings of 56 cents per share in the year-ago period.

Quarterly revenues came in at $4,192.7 million, lagging the consensus mark of $4,701 million by 10.8% and decreasing 13.1% year over year. The downside was mainly caused by lower contribution from Energy & Chemicals, Government, and Diversified Services segments.

Fluor Corporation Price, Consensus and EPS Surprise

Fluor Corporation Price, Consensus and EPS Surprise | Fluor Corporation Quote

Segment Discussion

Revenues from the Energy & Chemicals segment decreased 24% year over year to $1,476.6 million. The segment booked new awards worth $1,003 million, 39.1% higher than $721 million a year ago. Backlog at the end of the quarter amounted to $17.4 billion compared with $14.1 billion a year ago. Operating margin contracted 410 basis points (bps) year over year to 1.3% due to pre-tax charges resulting from estimate revisions on an offshore project and resolution of close-out matters with a customer.

Mining, Industrial, Infrastructure & Power segment's revenues totaled $1,381.2 million, up 52.3% on a year-over-year basis. New awards came in at $1,256 million, down from $1,339 million in the comparable period of 2018. The segment’s backlog at the end of the quarter was $15.1 billion compared with $10.3 billion a year ago. Operating margin improved to 0.4% from a negative 13.3% a year ago, backed by increased project execution activities in mining & metals.

Revenues at the Government segment declined 41% year over year to $784.7 million. Also, operating margin decreased 150 bps to 2.1% in the quarter, primarily due to the absence of restoration project and expenses related to NuScale. The said business received new awards of $331 million in the quarter, significantly higher than the year-ago level of $43 million. Quarter-end backlog was $4.2 billion compared with $2.4 billion a year ago.

Diversified Services revenues registered a fall of 14.5% on a year-over-year basis to $550.2 million. The segment’s new awards came in at $810 million, significantly up from $433 million in the year-earlier period. Quarter-end backlog was $2.6 billion compared with $2.3 billion a year ago. Operating margin contracted 100 bps to 1.9% in the quarter.

New Awards & Backlog

In the reported quarter, Fluor's total new awards of $3.4 billion reflected an increase of 34% on a year-over-year basis. At the end of the first quarter, consolidated backlog came in at $39.3 billion, up 35.1% from $30.9 billion recorded in the year-ago period.

Liquidity & Share Repurchases

As of Mar 31, 2019, Fluor had cash and marketable securities of $1,904.5 million, down from $1,979.6 million at the end of 2018. Long-term debt at the end of first-quarter 2019 decreased to $1,650.9 million from $1,661.6 million on Dec 31, 2018. Cash used for operating activities were $17.5 million during the quarter compared with $136 million a year ago.

2019 Guidance

As a result of a revision of its business forecast in Energy & Chemicals and Mining, Industrial, Infrastructure and Power, Fluor now expects earnings per share in the range of $1.50-$2.00 per share compared with $2.50-$3.00 expected earlier.

Zacks Rank & Stocks to Consider

Currently, Fluor carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Construction sector are Apergy Corporation APY, Jacobs Engineering Group Inc. JEC and AECOM ACM. While Apergy and Jacobs sport a Zacks Rank #1, AECOM carries a Zacks Rank #2 (Buy).

Apergy has a strong record of earnings surprises, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average being 7.9%.

Jacobs and AECOM’s earnings growth rate is projected at 18.6% and 3.4%, respectively, for the current year.

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