Fluor Misses on Q1 Earnings and Revs - Analyst Blog

Fluor Corporation FLR reported first-quarter 2014 results yesterday on May 1, after market closed. The company reported first-quarter net earnings of $149 million or 92 cents per share, missing the Zacks Consensus Estimate of 96 cents by 4.2%. Quarterly earnings were also down 9.8% year over year.

Profits during the quarter were impacted by continued weakness in many of the company's end markets.

Total Revenue

Total revenue for the first quarter came in at $5.4 billion compared with $7.2 billion in first-quarter of 2013, reflecting a substantial 25.1% decline. The contraction was primarily attributable to the sluggish performance of the mining and metals business under the Industrial & Infrastructure segment. Revenues fell short of the Zacks Consensus Estimate of $6.6 billion.

In the reported quarter, the company inked contracts worth $10.7 billion. This included $8.8 billion in the Oil & Gas segment, $924 million in Industrial & Infrastructure and $748 billion in the Government segment. Consolidated backlog was $70.2 billion at quarter-end, up from $37.5 billion in the first quarter of 2013.

Segment Revenue

Revenues from the Oil & Gas segment were flat year over year at $2.7 billion. New awards for the segment totaled $8.8 billion, including a portion of the engineering, procurement and construction of an LNG project in Canada, as well as a major clean fuels refinery project in Kuwait, a refinery expansion in Canada, a pipeline project in Mexico and a chemicals project in Malaysia. At the end of the quarter, backlog for the Oil & Gas segment grew 38%, from $18.6 billion a year ago to $25.7 billion.

Revenues in the Industrial & Infrastructure segment came in at $1.7 billion, down 45.2% from $3.1 billion a year ago. Lower revenues reflect a decline in contributions from the mining and metals business line, partly offset by growth in the infrastructure and industrial services business lines. New awards for the first quarter amounted to $924 million, including additional scope on a copper project in Peru and an iron ore facility in Australia. Backlog for the quarter was $9.9 billion, down 38.1% from $16.0 billion a year ago, attributable to substantially lower new awards for mining and metals over the past year.

Revenues in the Government segment were down 21% to $593 million, due to the reduction in LOGCAP IV task order volume. New awards totaled $748 million for the quarter, including a five-year contract to maintain the United States' Strategic Petroleum Reserve for the Department of Energy. Backlog at the end of the quarter was $2.6 billion, up from $2.4 billion recorded in the last quarter.

Revenues in the Global Services segment declined marginally to $143 million. Lower results in the quarter were attributable to reductions in the equipment business line's activities in the mining sector in Africa and Latin America.

The Power Group segment reported a 34% decline in revenues for the quarter to $251 million compared with $383 million a year ago, as two solar projects and a gas-fired power plant are nearing completion. New awards for the quarter totaled $166 million compared with $448 million in the first quarter of 2013. Backlog at the end of the first quarter was $1.9 billion, which was flat year over year.

Balance Sheet

Exiting the quarter, cash and marketable securities, amounted to $2.6 billion versus $2.7 billion as of Dec 31, 2013. Long-term debt remained unchanged at $496 million. Shareholders' equity was $3.7 billion.

Revised Outlook

Concurrent with the first-quarter earnings release, Fluor lowered the higher end of its earnings guidance. The company now expects earnings to be in the range of $4.10 to $4.45 a share compared with $4.10–$4.60 per share mentioned earlier. However, Fluor is positive about its strong prospects for continued growth, especially in Oil & Gas.

Fluor currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are AVT, Inc. (AVTC), Plug Power Inc. PLUG, AO Smith Corp. AOS, all carrying a Zacks Rank #2 (Buy).