Fluor Corporation
(FLR) reported earnings per share from continuing operations of 76 cents for the first quarter of 2010 compared with the Zacks Consensus Estimate of 74 cents. Revenue was $4.9 billion, down from $5.8 billion in the first quarter of 2009. First quarter results reflect lower Oil & Gas revenue and profit, partly offset by growth in the Power, Government and Industrial & Infrastructure segments.
The results were consistent with expectations for a delayed recovery in fiscal year 2010.
New project awards for the first quarter were $3.4 billion, which compares with $5.5 billion in new awards a year ago. Awards in the quarter were diversified, including $1.4 billion in Oil & Gas projects, $1.0 billion in Industrial & Infrastructure projects, and approximately $400 million from each of the Government and the Global Services segments.
Fluor’s Oil & Gas business unit reported a segment profit of $92 million, down from $201 million in the first quarter of 2009. Revenue was $2.1 billion, compared with $3.4 billion last year, reflecting slowing new awards and a declining backlog. Segment profits were impacted by reduced man-hours.
The Industrial & Infrastructure group reported segment profit of $32 million, up 13% from the first quarter of 2009, reflecting strong growth from the mining and metals business line. Revenue for the segment was $1.2 billion, up 6% from a year ago, driven by growth in the mining and metals and infrastructure business lines.
The Government segment posted a profit of $35 million, up 27% from the first quarter of 2009. Revenue for the quarter grew 79% to $663 million, compared with $371 million a year ago. Improved results primarily reflect increased contributions from LOGCAP IV task orders in Afghanistan.
Segment profit for Global Services was $27 million in the first quarter, down from $47 million a year ago. Revenue of $339 million was down 20%.
Fluor Power Group’s first quarter profit doubled over the prior year quarter to $56 million on revenues of $534 million, which increased 16% over the first quarter of 2009. Increased segment profit reflects solid contributions from ongoing projects and the benefit of positive project performance on a large coal-fired power project that is nearing completion.
Cash and equivalents were $2.6 billion with negligible long-term debt and shareholders’ equity of $3.4 billion.
Business prospects in mining continue to display strength, while operations and maintenance spending remain weak. Fluor’s oil and gas markets are still in transition, but there are indications that a limited number of key projects could be released this year. Overall, Fluor’s new award prospects across its portfolio are substantial. The company reaffirmed its 2010 expected EPS range of $2.80−$3.20 per share.
Fluor stands out as one of the few engineering and construction companies that has the technological expertise, logistics and procurement capabilities, and project management experience needed to execute a large variety of projects, including large and complex projects for a diverse group of industrial and government clients virtually anywhere in the world. Given its strong financial position, Fluor will have ample financial resources to pursue a niche acquisition program aimed at strengthening its considerable service breadth. The company is delivering solid results driven by its diversified business model and targeted new awards strategy. With a proven management team and a strong balance sheet, Fluor is poised to outperform in the current market environment.
Fluor is one of the best-in-class E&C companies with a favorable contract mix, diverse service offerings, and strong relationships around the world, thus allowing it to sustain its operating margin without diminishing growth potential.

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