Fluor Corporation Beats Estimates – Analyst Blog

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.