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Fluor (FLR) Down 3.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Fluor (FLR - Free Report) . Shares have lost about 3.2% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Fluor (FLR - Free Report) Reports Loss in Q1, Misses Revenue Estimates

Fluor Corporation reported first-quarter 2019 results, wherein 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.

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 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 adjusted earnings per share in the range of $1.50-$2.00 per share, lower than $2.15 per share registered in 2018.

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 -13.12% due to these changes.

VGM Scores

Currently, Fluor has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. It's no surprise Fluor has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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