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Fluor Corporation (FLR - Free Report) posted its third consecutive earnings miss, as its second-quarter 2016 adjusted earnings of 72 cents per share fell short of the Zacks Consensus Estimate of 87 cents by 17.2%. The figure fared even worse in year-over-year comparison, having fallen 28% from the prior-year tally of $1.00 per share.
Additionally, concurrent with the bleak market scenario, Fluor narrowed its 2016 full-year guidance, leaving investors disappointed. These adverse developments led to a sharp 7.9% drop in the shares of the company in the after-hours trading following the earnings release.
The bottom-line decline was primarily on account of significant top-line contraction in the Energy, Chemicals and Mining segment.
Inside the Headlines
Total revenue inched up 1% year over year to $4,856.1 million, also managing to surpass the Zacks Consensus Estimate of $4,712 million. The considerable fall in revenues in the Energy, Chemicals & Mining segment of the company was more than offset by improvements in the other three segments, thereby resulting in the lackluster top-line performance.
During the quarter, the company announced plans of implementing a change in the reporting segments in order to better reflect the diverse end markets of the company. The company has condensed its business lines into four segments, namely, Energy, Chemicals & Mining, Industrial, Infrastructure & Power, Maintenance, Modification & Asset Integrity and Government from the previous Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. The company started reporting under these four segments from the first quarter of 2016.
Revenues from the Energy, Chemicals & Mining segment continued to plummet, falling 24.1% year over year to $2,476.4 million. Softness in mining activities and forecast revisions on two projects proved to be an overhang.
Industrial, Infrastructure & Power segment’s revenues posted another solid quarter, with revenues soaring 73.9% year over year to $1,010 million. Sales of this segment largely benefited from solid execution activities on nuclear and gas-fired power projects.
Revenues at the Government segment were up 9.1% year over year to $657.9 million, mainly on account of profitable project wins and execution.
Maintenance, Modification & Asset Integrity revenues almost doubled (up 96.1%) to $711.8 million on a year-over-year basis. This segment largely benefited from the recent Stork buyout that boosted sales at the Global Services unit, which was somewhat offset by weakness in the equipment business line.
For the reported quarter, Fluor’s new awards were up 50.7% to $6.4 million on a year-over-year basis. Orders in the Government segment totaled $1.2 billion, task orders for LOGCAP IV. Orders at the Industrial, Infrastructure & Power segment were $3.4 billion, including the Purple Line Project in Maryland and the Greensville combined-cycle power plant in Virginia.
Orders in the Energy, Chemicals & Mining segment totaled $1.2 billion, and included a $500 million bauxite mine in Guinea. Also, Maintenance, Modification & Asset Integrity segment recorded awards totaling $644 million.
Consolidated backlog at the end of the quarter was $47.3 billion, up from $41.6 billion in the year-ago quarter. The upside in backlog levels came on the back of large awards won in infrastructure and government business lines.
Liquidity & Shares Repurchases
As of Mar 31, 2016, Fluor had cash and marketable securities (including non-current) of $1,915.9 million, down from $2,367.6 million as on Dec 31, 2015. Long-term debt rose to $1,547.5 million from $986.6 million as on Dec 31, 2015.
2016 Guidance
In light of the persistent softness in the Energy, Chemicals and Mining segment, Fluor has narrowed its full-year 2016 guidance, as the company’s revenues are expected to take a beating on account of this formidable headwind. Currently, the company projects earnings per share for 2016 in the range of $3.25 to $3.50 (previous range: $3.25–$3.65 per share).
Going forward, we believe Fluor’s solid track record of winning awards is a major positive that will drive revenues and margins. Also, the company’s strong backlog levels hint at bright days ahead especially for the government and infrastructure business lines. This apart, the company’s strong financial position, diligent restructuring initiatives and strong foothold in the U.S. engineering and construction sector are expected to boost growth.
However, on the flip side, softness in commodity prices coupled with a dismal outlook for the energy and mining markets pose threats that can significantly impede the company’s top-line growth. Also, the company expects continued slow recovery in the global economy, as customers continue to reduce capital investment budgets and delay final investment decisions. This could impact Fluor’s future performance adversely.
Fluor currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the same space include Willdan Group, Inc. (WLDN - Free Report) , AECOM (ACM - Free Report) and Jacobs Engineering Group Inc. . While Willdan sports a Zacks Rank #1 (Strong Buy), AECOM and Jacobs both hold a Zacks Rank #2 (Buy).
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Fluor (FLR): Q2 Earnings Miss, Revenues Top; View Narrowed
Fluor Corporation (FLR - Free Report) posted its third consecutive earnings miss, as its second-quarter 2016 adjusted earnings of 72 cents per share fell short of the Zacks Consensus Estimate of 87 cents by 17.2%. The figure fared even worse in year-over-year comparison, having fallen 28% from the prior-year tally of $1.00 per share.
Additionally, concurrent with the bleak market scenario, Fluor narrowed its 2016 full-year guidance, leaving investors disappointed. These adverse developments led to a sharp 7.9% drop in the shares of the company in the after-hours trading following the earnings release.
The bottom-line decline was primarily on account of significant top-line contraction in the Energy, Chemicals and Mining segment.
Inside the Headlines
Total revenue inched up 1% year over year to $4,856.1 million, also managing to surpass the Zacks Consensus Estimate of $4,712 million. The considerable fall in revenues in the Energy, Chemicals & Mining segment of the company was more than offset by improvements in the other three segments, thereby resulting in the lackluster top-line performance.
During the quarter, the company announced plans of implementing a change in the reporting segments in order to better reflect the diverse end markets of the company. The company has condensed its business lines into four segments, namely, Energy, Chemicals & Mining, Industrial, Infrastructure & Power, Maintenance, Modification & Asset Integrity and Government from the previous Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. The company started reporting under these four segments from the first quarter of 2016.
Revenues from the Energy, Chemicals & Mining segment continued to plummet, falling 24.1% year over year to $2,476.4 million. Softness in mining activities and forecast revisions on two projects proved to be an overhang.
Industrial, Infrastructure & Power segment’s revenues posted another solid quarter, with revenues soaring 73.9% year over year to $1,010 million. Sales of this segment largely benefited from solid execution activities on nuclear and gas-fired power projects.
Revenues at the Government segment were up 9.1% year over year to $657.9 million, mainly on account of profitable project wins and execution.
Maintenance, Modification & Asset Integrity revenues almost doubled (up 96.1%) to $711.8 million on a year-over-year basis. This segment largely benefited from the recent Stork buyout that boosted sales at the Global Services unit, which was somewhat offset by weakness in the equipment business line.
For the reported quarter, Fluor’s new awards were up 50.7% to $6.4 million on a year-over-year basis. Orders in the Government segment totaled $1.2 billion, task orders for LOGCAP IV. Orders at the Industrial, Infrastructure & Power segment were $3.4 billion, including the Purple Line Project in Maryland and the Greensville combined-cycle power plant in Virginia.
Orders in the Energy, Chemicals & Mining segment totaled $1.2 billion, and included a $500 million bauxite mine in Guinea. Also, Maintenance, Modification & Asset Integrity segment recorded awards totaling $644 million.
Consolidated backlog at the end of the quarter was $47.3 billion, up from $41.6 billion in the year-ago quarter. The upside in backlog levels came on the back of large awards won in infrastructure and government business lines.
Liquidity & Shares Repurchases
As of Mar 31, 2016, Fluor had cash and marketable securities (including non-current) of $1,915.9 million, down from $2,367.6 million as on Dec 31, 2015. Long-term debt rose to $1,547.5 million from $986.6 million as on Dec 31, 2015.
2016 Guidance
In light of the persistent softness in the Energy, Chemicals and Mining segment, Fluor has narrowed its full-year 2016 guidance, as the company’s revenues are expected to take a beating on account of this formidable headwind. Currently, the company projects earnings per share for 2016 in the range of $3.25 to $3.50 (previous range: $3.25–$3.65 per share).
FLUOR CORP-NEW Price and EPS Surprise
FLUOR CORP-NEW Price and EPS Surprise | FLUOR CORP-NEW Quote
Our Take
Going forward, we believe Fluor’s solid track record of winning awards is a major positive that will drive revenues and margins. Also, the company’s strong backlog levels hint at bright days ahead especially for the government and infrastructure business lines. This apart, the company’s strong financial position, diligent restructuring initiatives and strong foothold in the U.S. engineering and construction sector are expected to boost growth.
However, on the flip side, softness in commodity prices coupled with a dismal outlook for the energy and mining markets pose threats that can significantly impede the company’s top-line growth. Also, the company expects continued slow recovery in the global economy, as customers continue to reduce capital investment budgets and delay final investment decisions. This could impact Fluor’s future performance adversely.
Fluor currently has a Zacks Rank #4 (Sell). Better-ranked stocks in the same space include Willdan Group, Inc. (WLDN - Free Report) , AECOM (ACM - Free Report) and Jacobs Engineering Group Inc. . While Willdan sports a Zacks Rank #1 (Strong Buy), AECOM and Jacobs both hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>