Why Is Fluor (FLR) Down 5.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Fluor (FLR). Shares have lost about 5.9% 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 the most recent earnings report in order to get a better handle on the important drivers.
Fluor's (FLR) Q4 Earnings Beat Estimates, New Awards Strong
Fluor Corporation’s fourth-quarter 2018 earnings surpassed the Zacks Consensus Estimate and increased from the year-ago level. The company reported adjusted earnings of 77 cents per share in the quarter, beating the consensus mark of 61 cents by 26.2%. The reported earnings increased 10% from 70 cents per share recorded in the year-ago period.
Fourth-quarter revenues came in at $4,801 million, lagging the consensus mark of $4,826 million by 0.5% and decreasing 4.5% year over year. The downside was mainly caused by lower contribution from Energy & Chemicals, Government and Diversified Services segments.
Segment Discussion
Revenues from the Energy & Chemicals segment declined 11.4% year over year to $1,838.4 million. In the reported quarter, the segment booked new awards worth $8,783 million, significantly higher than $977 million a year ago. Backlog at the end of the quarter amounted to $17.8 billion compared with $15.1 billion a year ago. Operating margin decreased 100 bps year over year to 4.6%.
Mining, Industrial, Infrastructure & Power segment's revenues recorded 20.5% year-over-year growth to $1,549 million. New awards came in at $438 million, down from $637 million in the fourth quarter of 2017. The segment’s backlog at the end of the quarter was $15.3 billion compared with $9.6 billion a year ago. Operating margin improved to 0.9% from a negative 0.8% a year ago.
Revenues at the Government segment declined 16.4% year over year to $800.5 million. Also, operating margin contracted 220 bps to 2.94.1% in the quarter. The business received new awards of $33 million in the quarter, significantly lower than the year-ago level of $1,053 million. Quarter-end backlog was $4.6 billion compared with $3.8 billion a year ago.
Diversified Services revenues decreased 13.6% on a year-over-year basis to $613.1 million. The segment’s new awards came in at $856 million, up from $568 million in the year-earlier period. Quarter-end backlog was $2.3 billion compared with $2.5 billion a year ago. Operating margin contracted 100 bps to 4.5% in the quarter.
New Awards & Backlog
In the reported quarter, Fluor's total new awards recorded an increase of 212.2% on a year-over-year basis to $10.1 billion. Full-year new awards more than doubled to $27.7 billion, comprising $10.6 billion in Energy & Chemicals; $10.8 billion in Mining, Industrial, Infrastructure & Power; $4.1 billion in Government and $2.1 billion in Diversified Services.
At the end of 2018, consolidated backlog was $40 billion, up from $30.9 billion in the comparable year-ago period.
2018 Highlights
Adjusted earnings came in at $2.15 per share compared with $1.63 a year ago. Full-year 2018 total revenues of $19.2 billion decreased from $19.5 billion in 2017. Consolidated segment profit was $602 million, up from $545 million a year ago.
Liquidity & Share Repurchases
As of Dec 31, 2018, Fluor had cash and marketable securities (including non-current assets) of $1,979.6 million, down from $2,078.8 million in the comparable period of 2017. Long-term debt at the end of 2018 increased to $1,661.6 million from $1,591.6 million on Dec 31, 2017.
2019 Guidance
For 2019, it currently expects earnings per share in the range of $2.50-$3.00. This reflects a gradual ramp in business through the year and expectations for further improvement into 2020 as the company begins to execute on LNG Canada, mining, and other projects.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.97% due to these changes.
VGM Scores
At this time, Fluor has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 B. 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 this revision indicates a downward shift. Notably, 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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