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Fluor's (FLR) Stock Up on Q2 Earnings Beat, 2021 View Raised

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Fluor Corporation (FLR - Free Report) reported impressive second-quarter 2021 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while revenues missed the same for four consecutive quarters.

Following the results, shares of the company gained nearly 4% during the pre-market trading session on Aug 6.

David Constable, chief executive officer of Fluor, said, “I am confident that we remain on the right path to achieve the strategic priorities that we established earlier this year. Despite a charge on a legacy infrastructure project in the quarter, I am otherwise pleased with the progress we are making on the remaining fixed price projects in our portfolio.”

Inside the Headlines

Fluor reported adjusted earnings of 32 cents per share, handily beating the Zacks Consensus Estimate of 6 cents by 433.3%.

Fluor Corporation Price, Consensus and EPS Surprise

Fluor Corporation Price, Consensus and EPS Surprise

Fluor Corporation price-consensus-eps-surprise-chart | Fluor Corporation Quote

Quarterly revenues of $3.24 billion, however, missed the consensus mark of $3.31 billion by 2.3% and decreased 13.3% from the year-ago level of $3.73 million. The downside was primarily caused by lower contribution from all the three segments.

Fluor's total new awards for the quarter came in at $1.37 billion compared with $1.93 billion a year ago. Consolidated backlog at quarter-end came in at $21.07 billion, down from $23.8 billion a year ago.

Segmental Discussion

The company has changed the composition of its segments to implement a new strategy and pursue opportunities. Fluor now reports results in four reportable segments as follows: Energy Solutions, Urban Solutions, Mission Solutions and Other.

Energy & Chemicals segment’s revenues fell 11.9% year over year to $1.32 billion for the quarter. Nonetheless, the segment reported a profit of $109.2 million compared with $42.7 million a year ago. The upside reflects the negotiation of change orders, scope increases and cost improvements across numerous projects. Also, it includes the collection of a previously reserved account receivable and reversal of the related position. New awards came in at $661 million, up from $197 million in the second quarter of 2020. Backlog at quarter-end was $10.6 billion compared with $11.1 billion in the year-ago period.

Revenues in the Urban Solutions segment totaled $1.21 billion, down 20% on a year-over-year basis. Segment loss totaled $68.4 million against profit of $38.5 million a year ago. The bottom line includes charges of $138 million for procurement and subcontractor cost growth, delays as well disruptions in the schedule of a legacy infrastructure project. New awards came in at $617 million, down from $791 million a year ago. Backlog at quarter-end was $8 billion compared with $9.7 billion in second-quarter 2020 due to cancellation of a steel project and continued new award softness.

Revenues in the Mission Solutions segment totaled $707.1 million, down 2.4% on a year-over-year basis. Nonetheless, the segment reported a profit of $44.9 million compared with $9.7 million a year ago. Results for the quarter reflect increased execution activity on DOE projects, higher-than-anticipated performance-based fees and the release of COVID-19 cost reserves, offset by a decline in execution activity on army logistics and life support programs in Afghanistan as well as Africa. However, it booked new awards worth $92 million, significantly down from $941 million a year ago. Backlog at quarter-end was $2.4 billion compared with $3 billion in the year-ago period.

The Other segment — comprising NuScale — recognized loss of $18.5 million in both the reported and year-ago periods.

2021 Guidance Raised

For 2021, Fluor now expects adjusted earnings per share in the range of 60-80 cents compared with 46-71 cents expected earlier. The consensus mark for the same is currently pegged at 59 cents per share. The guidance excludes NuScale expenses and other adjustments. For second-half 2021, the company may witness some headwinds and inconsistency in new awards, as the optimism in post-pandemic capital spending from clients is partially offset by increasing labor and materials costs.

Zacks Rank

Fluor — which shares space with Jacobs Engineering Group Inc. (J - Free Report) , AECOM (ACM - Free Report) and KBR, Inc. (KBR - Free Report) in the Zacks Engineering - R and D Services industry — currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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