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ShareFluor Corporation (FLR) reported earnings per share from continuing operations of 87 cents in the second quarter of 2010 compared with the Zacks Consensus Estimate of 70 cents. Revenues were $5.15 billion, down from $5.29 billion in the second quarter of 2009 but higher than the Zacks Consensus Estimate of $4.9 billion. Second-quarter results reflect weaker Oil & Gas revenues and profit, partly offset by growth in the Power and Industrial & Infrastructure segments.
New project awards in the second quarter were $9.3 billion, which surpassed the average of $3 billion for the previous three quarters. Awards in the quarter were diversified, including $7.2 billion in Industrial & Infrastructure projects, $1.0 billion in Oil & Gas projects, and approximately $600 million from Government segment.
Fluor’s Oil & Gas business unit reported a segment profit of $1.8 million, down 42% from the second quarter of 2009. Segment profits were impacted by lower revenues. New orders were $1 billion and were won internationally. Order backlog was $10.2 billion, which was lower than the prior-year level of 35.4%.
The Industrial & Infrastructure group reported segment profit of $48 million, up 42% from the second quarter of 2009, reflecting strong growth from the mining and metals business line. Revenue for the segment was $1.8 billion, up 82% from the year-ago period, driven by growth in the mining and infrastructure business lines.
The Government segment posted a profit of $35 million. Revenue in the quarter grew 62% to $777 million, compared with the year-ago period. Improved results primarily reflect increased contributions from LOGCAP IV task orders in Afghanistan.
Segment profit for Global Services was $32 million in the second quarter, up 24% from the corresponding prior-year period. Revenues of $327 million were on par with the second quarter of 2009.
Fluor Power Group’s second quarter profit rose 41% over the prior year quarter to $50 million on revenues of $469 million, which increased 5% over the second quarter of 2009. Increased segment profit reflects solid contributions from ongoing projects and the benefit of positive project performance on a large coal-fired power project that is nearing completion.
Cash and equivalents were $2.1 billion with negligible long-term debt and shareholders’ equity of $3.5 billion.
Guidance
Business prospects in mining continue to display strength, while operations and maintenance spending remain weak. Fluor’s oil and gas markets are still in transition, but there are indications that a limited number of key projects could be released this year. Overall, Fluor’s new award prospects across its portfolio are substantial. The company increased the lower end of its previously issued 2010 earnings per share guidance from $2.80 to $3.20 per share to $2.90 to $3.20.
Fluor stands out as one of the few engineering and construction companies that has the technological expertise, logistics and procurement capabilities, and project management experience needed to execute a large variety of projects, including large and complex projects for a diverse group of industrial and government clients virtually anywhere in the world.
Given its strong financial position, Fluor will have ample financial resources to pursue a niche acquisition program aimed at strengthening its considerable service breadth. The company is delivering solid results driven by its diversified business model and targeted new awards strategy. With a proven management team and a strong balance sheet, Fluor is poised to out perform in the current market environment.
Fluor is one of the best-in-class engineering and construction companies with a favorable contract mix, diverse service offerings, and strong relationships around the world, thus allowing it to sustain its operating margin without diminishing growth potential.
We currently have a Neutral recommendation on Fluor Corporation.
Read the full analyst report on FLR
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