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Fluor Corporation’s (FLR - Free Report) first-quarter 2017 earnings (excluding non-recurring costs) came in at 57 cents per share, missing the Zacks Consensus Estimate of 67 cents by 14.9%. On a reported basis, the company’s EPS plunged 41.9% to 43 cents from the year-ago figure of 73 cents.
Shift from higher-margin engineering activities to lower-margin construction activities is mainly responsible for this earnings plunge. Further, pre-tax charge for unanticipated cost increases in Industrial, Infrastructure and Power segment projects, and a pre-tax foreign exchange expense also restricted earnings growth.
Inside the Headlines
First-quarter revenues came in at $4,835.9 million, surpassing the Zacks Consensus Estimate of $4,789 million by a small margin and up 9.3% year over year. Strong revenue gains from Industrial, Infrastructure and Power, and Diversified Services more than offset the revenue decline at the Energy, Chemicals and Mining segment, resulting in a sturdy top-line performance.
Revenues from the Energy, Chemicals and Mining segment continued to decline, down 5.8% year over year to $2,302.2 million. Factors including reduced volume of project execution activities for certain large chemicals projects proved to be major dampeners for this segment.
Industrial, Infrastructure and Power segment’s revenues posted another sound quarter, with revenues soaring 43.9% year over year to $1,199.3 million. Sales at this segment largely benefited from increased project execution activities for several power projects, including two nuclear projects for Westinghouse and two gas-fired power plants in the southeastern United States.
Revenues at the Government segment were up 11.6% year over year to $765.2 million, on the back of higher project execution activities for the Idaho Cleanup Project Core Contract (“Idaho Core Project”) and construction services projects.
Diversified Services revenues rose an impressive 23.4% to $569.2 million on a year-over-year basis. This segment largely benefited from the Stork buyout.
For the reported quarter, Fluor’s new awards were down 51.1% to $2.3 billion on a year-over-year basis. Orders at the Industrial, Infrastructure and Power segment were $777 million, including the A10 Zuidasdok motorway project in the Netherlands. The orders in the government business came in at $173 million, including the multi-year services contract and additional funding for the Paducah Gaseous Diffusion Plant project.
Orders at the Energy, Chemicals and Mining segment totaled $817 million. Orders at the Diversified Services segment grossed $546 million.
Consolidated backlog at the end of the quarter was $41.7 billion, down from $46.0 billion in the year-ago quarter. Adjustments made for a liquefied natural gas project in Canada and limiting the contractual term of the Magnox RSRL Project eroded the backlog.
Fluor Corporation Price, Consensus and EPS Surprise
As of Dec 31, 2017, Fluor had cash and marketable securities (including non-current) of $2,180.9 million, up from $2,105.0 million as on Dec 31, 2016. Long-term debt at the end of first-quarter 2017 rose to $1,526.0 million from $1,517.9 million as on Dec 31, 2016.
2017 Guidance Cut
Concurrent with the first-quarter 2017 results, the company slashed its 2017 guidance. The company currently projects earnings per share in the range of $2.25–$2.75 compared to the previous range of $2.75–$3.25 per share. The downward guidance revision is mainly attributable to risks associated with the pace of new awards and a waning revenue trajectory. Volatility in commodity prices also adds to the company’s woes.
Our Take
Fluor failed to maintain its earnings streak alive in the reported quarter, after two impressive beats. The company’s drab first-quarter 2017 results, marked by huge earnings fall and guidance cut, are unlikely to go down well with investors. The company’s precipitous backlog erosion poses as a major threat. Also, an increased level of irrational bidding in feed pricing, along with customer’s tendency to settle for a lower contract price, have been adding to the company’s woes.
Despite these challenges, this Zacks Rank #2 (Buy) company believes that stabilization of commodity prices and gradual improvement in energy/mining customer sentiment bode well for long-term growth. Also, passing of Fixing America's Surface Transportation Act (“FAST”) has boosted spending on transportation infrastructure in the U.S., which is a huge positive.
Other growth drivers include rising demand for energy across the globe, lucrative award wins in the company’s Government and Infrastructure segment and market diversity. In addition, the buyout of Dutch engineering and construction company – Stork Holding B.V. – has proved to be extremely profitable for the company’s “integrated solutions offerings.”
Key Picks
Other top ranked stocks in the industry include Louisiana-Pacific Corporation (LPX - Free Report) , Dycom Industries, Inc (DY - Free Report) and M.D.C. Holdings, Inc. . While Louisiana-Pacific and Dycom sport a Zacks Rank #1 (Strong Buy), M.D.C. Holdings carries the same Zacks Rank as Fluor. You can see the complete list of today’s Zacks #1 Rank stocks here.
Louisiana-Pacific has an impressive average positive earnings surprise of 66.3%, with three beats over the last four quarters.
Dycom has a positive average earnings surprise of 17.30% for the last four quarters, having beaten estimates all through.
M.D.C. Holdings has a modest earnings beat history, having surpassed estimates twice over the trailing four quarters. Last quarter, it beat estimates by 14.7%.
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Fluor's (FLR) Q1 Earnings Miss, Revenues Beat, View Cut
Fluor Corporation’s (FLR - Free Report) first-quarter 2017 earnings (excluding non-recurring costs) came in at 57 cents per share, missing the Zacks Consensus Estimate of 67 cents by 14.9%. On a reported basis, the company’s EPS plunged 41.9% to 43 cents from the year-ago figure of 73 cents.
Shift from higher-margin engineering activities to lower-margin construction activities is mainly responsible for this earnings plunge. Further, pre-tax charge for unanticipated cost increases in Industrial, Infrastructure and Power segment projects, and a pre-tax foreign exchange expense also restricted earnings growth.
Inside the Headlines
First-quarter revenues came in at $4,835.9 million, surpassing the Zacks Consensus Estimate of $4,789 million by a small margin and up 9.3% year over year. Strong revenue gains from Industrial, Infrastructure and Power, and Diversified Services more than offset the revenue decline at the Energy, Chemicals and Mining segment, resulting in a sturdy top-line performance.
Revenues from the Energy, Chemicals and Mining segment continued to decline, down 5.8% year over year to $2,302.2 million. Factors including reduced volume of project execution activities for certain large chemicals projects proved to be major dampeners for this segment.
Industrial, Infrastructure and Power segment’s revenues posted another sound quarter, with revenues soaring 43.9% year over year to $1,199.3 million. Sales at this segment largely benefited from increased project execution activities for several power projects, including two nuclear projects for Westinghouse and two gas-fired power plants in the southeastern United States.
Revenues at the Government segment were up 11.6% year over year to $765.2 million, on the back of higher project execution activities for the Idaho Cleanup Project Core Contract (“Idaho Core Project”) and construction services projects.
Diversified Services revenues rose an impressive 23.4% to $569.2 million on a year-over-year basis. This segment largely benefited from the Stork buyout.
For the reported quarter, Fluor’s new awards were down 51.1% to $2.3 billion on a year-over-year basis. Orders at the Industrial, Infrastructure and Power segment were $777 million, including the A10 Zuidasdok motorway project in the Netherlands. The orders in the government business came in at $173 million, including the multi-year services contract and additional funding for the Paducah Gaseous Diffusion Plant project.
Orders at the Energy, Chemicals and Mining segment totaled $817 million. Orders at the Diversified Services segment grossed $546 million.
Consolidated backlog at the end of the quarter was $41.7 billion, down from $46.0 billion in the year-ago quarter. Adjustments made for a liquefied natural gas project in Canada and limiting the contractual term of the Magnox RSRL Project eroded the backlog.
Fluor Corporation Price, Consensus and EPS Surprise
Fluor Corporation Price, Consensus and EPS Surprise | Fluor Corporation Quote
Liquidity & Shares Repurchases
As of Dec 31, 2017, Fluor had cash and marketable securities (including non-current) of $2,180.9 million, up from $2,105.0 million as on Dec 31, 2016. Long-term debt at the end of first-quarter 2017 rose to $1,526.0 million from $1,517.9 million as on Dec 31, 2016.
2017 Guidance Cut
Concurrent with the first-quarter 2017 results, the company slashed its 2017 guidance. The company currently projects earnings per share in the range of $2.25–$2.75 compared to the previous range of $2.75–$3.25 per share. The downward guidance revision is mainly attributable to risks associated with the pace of new awards and a waning revenue trajectory. Volatility in commodity prices also adds to the company’s woes.
Our Take
Fluor failed to maintain its earnings streak alive in the reported quarter, after two impressive beats. The company’s drab first-quarter 2017 results, marked by huge earnings fall and guidance cut, are unlikely to go down well with investors. The company’s precipitous backlog erosion poses as a major threat. Also, an increased level of irrational bidding in feed pricing, along with customer’s tendency to settle for a lower contract price, have been adding to the company’s woes.
Despite these challenges, this Zacks Rank #2 (Buy) company believes that stabilization of commodity prices and gradual improvement in energy/mining customer sentiment bode well for long-term growth. Also, passing of Fixing America's Surface Transportation Act (“FAST”) has boosted spending on transportation infrastructure in the U.S., which is a huge positive.
Other growth drivers include rising demand for energy across the globe, lucrative award wins in the company’s Government and Infrastructure segment and market diversity. In addition, the buyout of Dutch engineering and construction company – Stork Holding B.V. – has proved to be extremely profitable for the company’s “integrated solutions offerings.”
Key Picks
Other top ranked stocks in the industry include Louisiana-Pacific Corporation (LPX - Free Report) , Dycom Industries, Inc (DY - Free Report) and M.D.C. Holdings, Inc. . While Louisiana-Pacific and Dycom sport a Zacks Rank #1 (Strong Buy), M.D.C. Holdings carries the same Zacks Rank as Fluor. You can see the complete list of today’s Zacks #1 Rank stocks here.
Louisiana-Pacific has an impressive average positive earnings surprise of 66.3%, with three beats over the last four quarters.
Dycom has a positive average earnings surprise of 17.30% for the last four quarters, having beaten estimates all through.
M.D.C. Holdings has a modest earnings beat history, having surpassed estimates twice over the trailing four quarters. Last quarter, it beat estimates by 14.7%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>