FBR Downgrades Fluor Given 'Intermediate-Term Uncertainty'

On Friday, FBR & Co. issued a company note on Fluor Corporation (NEW) (NYSE: FLR) and lowered its earnings estimates after the company announced 4Q15 results below consensus expectations. Analysts at FBR & Co downgraded Fluor Corporation from Outperform to Market Perform and lowered their price target from $57 to $46.

Alex Rygiel and Min Cho, analysts at FBR, wrote, "We are lowering our estimates to reflect weaker revenue and profit margin expectations for both 2016 and 2017 [...] the share price is not expensive, yet given the significantly uncertain outlook across the global oil & gas and mining market-place, we believe that it is unlikely that backlog (and subsequently earnings) will increase."

Related Link: Fluor Downgraded To Market Perform At FBR; Firm Needs Greater Visibility

Justification

Analysts at FBR & Co gave two reasons why they downgraded Fluor Corporation:

1. Few Catalysts For Revenue Growth
Analysts noted that Fluor Corporation's 12-month backlog of $17 billion is down 10 percent year over year. This may make achieving revenue growth difficult as the company's top line is significantly dependent on the visibility of future orders.

2. Profitability
FBR noted that Fluor Corporation had over $31 million of cost overruns in the fourth quarter of 2015. This, along with signs that consumer demand may be slowing, has caused analysts at FBR to question the ability for margin expansion in 2016.

At the time of publication, Fluor Corporation was seen trading down 6.63 percent at $43.38.

Image Credit: Public Domain