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Fluor (FLR) Q2 Earnings: Disappointment in the Cards?
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Fluor Corporation (FLR - Free Report) is set to report second-quarter 2016 results, after the closing bell on Aug 4.
Last quarter, the company disappointed investors by posting a negative earnings surprise of 1.2%. The company has had a disappointing earnings history, registering positive earnings surprise in just one of the last four quarters, resulting in a negative average surprise of 6.4%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Since Apr 2015, Fluor’s financials have been taking a beating on account of commodity price volatility. The precipitous decline in the prices of crude oil and certain metals has been marring the company’s prospects. Lower commodity prices continue to impact cash flow of Fluor’s customers, which in turn, is adversely affecting their ability to fund new projects. During the first quarter of 2016, the company’s clients in the Energy, Chemicals and Mining domain maintained a cautious approach while taking investment decisions.
For instance, clients like Sasol and Pemex have delayed their projects on account of macroeconomic uncertainties while deferred works at the Kitimat project is adding to Fluor’s concerns. We believe significant project deferrals will be one of the biggest drags on the company’s financials in the second quarter of 2016. Also, sluggish economic growth and softness in key geographic regions are compounding challenges for the company.
These conditions are particularly hurting the company’s non-oil and gas end markets. Additionally, softness in the mining and metals business continues to dampen the commercial opportunities for the company. These headwinds are expected to deal a heavy blow to the company’s top and bottom line in the soon to be reported quarter. Also, foreign currency fluctuations may play spoilsport. Furthermore, an unimpressive revenue trajectory coupled with persistent backlog conversion hint at a weak performance in the second quarter.
Despite these negatives, Fluor’s market diversity and strong hold in the U.S. engineering and construction sector are major strengths. We believe that the company’s prospects in the government and power business segments will act as fundamental growth drivers in the second quarter. Currently, low natural gas prices continue to support investments in North American chemicals projects and gas fired power plants, which in turn open up considerable scope for Fluor.
Also, the recently passed Fixing America's Surface Transportation Act (“FAST”) is expected to boost spending on transportation infrastructure in the U.S., which is a huge positive. During the first quarter of 2016, half of the orders for the company were from the government sector, totaling $2.3 billion. Moreover, the U.S. Department of Energy Extends Portsmouth Decontamination and Decommissioning (DOS) extended its contract with Fluor through Sep 2018.
In fact, the winning of lucrative awards has proved to be a major revenue and margin driver. Some of the major deals secured during the second quarter include a contract to maintain the Purple Line project for the Maryland Department of Transportation (and the Maryland Transit Administration) and a contract to design and build the Port Access Road Project from the South Carolina Department of Transportation (SCDOT).
In addition, Flour’s Stork buyout has strengthened its “integrated solutions offerings” and contributed to toward the 23.6% increase in revenues in the Maintenance, Modification & Asset business during the first quarter. We believe that the Stork acquisition will help the company counter commodity price sensitivity and cyclicality in project-driven engineering and construction businesses.
Our proven model does not conclusively show that Flour will beat earnings in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company currently stands at 0.00%. This is because both the Zacks Consensus Estimate and the Most Accurate estimate stands at 87 cents.
Zacks Rank: Fluor currently carries a Zacks Rank #4 (Sell). As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Harsco Corporation has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is scheduled to report results on Aug 4.
Impax Laboratories has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is slated to release quarterly results on Aug 9.
Exelixis, Inc. (EXEL - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank #3. The company is likely to report its financial numbers on Aug 3.
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 >>
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Fluor (FLR) Q2 Earnings: Disappointment in the Cards?
Fluor Corporation (FLR - Free Report) is set to report second-quarter 2016 results, after the closing bell on Aug 4.
Last quarter, the company disappointed investors by posting a negative earnings surprise of 1.2%. The company has had a disappointing earnings history, registering positive earnings surprise in just one of the last four quarters, resulting in a negative average surprise of 6.4%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Since Apr 2015, Fluor’s financials have been taking a beating on account of commodity price volatility. The precipitous decline in the prices of crude oil and certain metals has been marring the company’s prospects. Lower commodity prices continue to impact cash flow of Fluor’s customers, which in turn, is adversely affecting their ability to fund new projects. During the first quarter of 2016, the company’s clients in the Energy, Chemicals and Mining domain maintained a cautious approach while taking investment decisions.
For instance, clients like Sasol and Pemex have delayed their projects on account of macroeconomic uncertainties while deferred works at the Kitimat project is adding to Fluor’s concerns. We believe significant project deferrals will be one of the biggest drags on the company’s financials in the second quarter of 2016. Also, sluggish economic growth and softness in key geographic regions are compounding challenges for the company.
These conditions are particularly hurting the company’s non-oil and gas end markets. Additionally, softness in the mining and metals business continues to dampen the commercial opportunities for the company. These headwinds are expected to deal a heavy blow to the company’s top and bottom line in the soon to be reported quarter. Also, foreign currency fluctuations may play spoilsport. Furthermore, an unimpressive revenue trajectory coupled with persistent backlog conversion hint at a weak performance in the second quarter.
Despite these negatives, Fluor’s market diversity and strong hold in the U.S. engineering and construction sector are major strengths. We believe that the company’s prospects in the government and power business segments will act as fundamental growth drivers in the second quarter. Currently, low natural gas prices continue to support investments in North American chemicals projects and gas fired power plants, which in turn open up considerable scope for Fluor.
Also, the recently passed Fixing America's Surface Transportation Act (“FAST”) is expected to boost spending on transportation infrastructure in the U.S., which is a huge positive. During the first quarter of 2016, half of the orders for the company were from the government sector, totaling $2.3 billion. Moreover, the U.S. Department of Energy Extends Portsmouth Decontamination and Decommissioning (DOS) extended its contract with Fluor through Sep 2018.
In fact, the winning of lucrative awards has proved to be a major revenue and margin driver. Some of the major deals secured during the second quarter include a contract to maintain the Purple Line project for the Maryland Department of Transportation (and the Maryland Transit Administration) and a contract to design and build the Port Access Road Project from the South Carolina Department of Transportation (SCDOT).
In addition, Flour’s Stork buyout has strengthened its “integrated solutions offerings” and contributed to toward the 23.6% increase in revenues in the Maintenance, Modification & Asset business during the first quarter. We believe that the Stork acquisition will help the company counter commodity price sensitivity and cyclicality in project-driven engineering and construction businesses.
FLUOR CORP-NEW Price and EPS Surprise
FLUOR CORP-NEW Price and EPS Surprise | FLUOR CORP-NEW Quote
Earnings Whispers
Our proven model does not conclusively show that Flour will beat earnings in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company currently stands at 0.00%. This is because both the Zacks Consensus Estimate and the Most Accurate estimate stands at 87 cents.
Zacks Rank: Fluor currently carries a Zacks Rank #4 (Sell). As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Harsco Corporation has an Earnings ESP of +38.46% and a Zacks Rank #1. The company is scheduled to report results on Aug 4.
Impax Laboratories has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is slated to release quarterly results on Aug 9.
Exelixis, Inc. (EXEL - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank #3. The company is likely to report its financial numbers on Aug 3.
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 >>