Net earnings attributable to Fluor Corporation (FLR) for the fourth quarter of 2009 were $149 million, or 82 cents per share, compared with $190 million, or $1.03 in 2008. This was lower than the Zacks Consensus Estimate of 88 cents.
 
The effective tax rate in the fourth quarter of 2009 was higher than expected at 39%, while the fourth quarter of 2008 benefited from a materially lower 24% effective tax rate due to a variety of factors. Segment profit for the quarter decreased 4% to $310 million, compared with $323 million a year ago.

Fourth quarter profits reflect growth in the Power, Government and Industrial & Infrastructure segments, offset by declines in Oil & Gas and Global Services. Corporate G&A expenses in the quarter were $61 million, down $22 million from a year ago, due in part to the effect of a $16 million provision in the fourth quarter of 2008 relating to the decision to relocate the company’s U.K. operations and cost reduction initiatives taken in 2009.

Revenue of $5.5 billion for the quarter was 10% below last year, mainly due to lower Oil & Gas activity. Fourth quarter new awards were $3.3 billion including awards of $1.6 billion in Industrial & Infrastructure and $912 million in Oil & Gas, compared with awards totaling $4.2 billion in the same quarter of 2008.
 
Full Year 2009

Net earnings attributable to Fluor for FY2009 declined 4% to $685 million, or $3.75 per share, compared with a record $716 million, or $3.89 per share in 2008. Consolidated segment profit for the year was $1.25 billion, down 3% from $1.29 billion a year ago.

Full year results reflect very strong profit growth in Government and Power along with Oil & Gas results, which matched record levels achieved last year, offset by declines in Global Services and Industrial & Infrastructure. Consolidated revenue for the year totaled $22.0 billion, effectively flat with $22.3 billion a year ago, and segment margin was 5.7% compared with 5.8% last year.

Consolidated segment profit for the year was $1.25 billion that was down 3% from $1.29 billion a year ago. Full year results reflected very strong profit growth in the Government and Power segments. And Oil and Gas results which matched record levels achieved last year were offset by a decline in global services.

Full year new awards were $18.5 billion, down from record bookings of $25.1 billion a year ago, mainly due to a significant decline in Oil & Gas awards during 2009. Year-end backlog was $26.8 billion, a 19% decrease from the prior year. While there were no material cancellations in the fourth quarter, backlog was impacted by approximately $5.3 billion from cancellations and scope reductions since the beginning of 2009.

Corporate G&A expense for the year improved substantially to $179 million, from $229 million a year ago, mainly driven by lower compensation-related expenses and cost reduction initiatives. Net interest income for 2009 was $14 million, substantially below $48 million earned last year, primarily due to the impact of lower interest rates.

Fluor’s financial condition continued to strengthen, with cash plus current and non-current marketable securities totaling $2.6 billion, which is up from $2.1 billion a year ago.
 
Fluor’s strong earnings in 2009, which included very good performance from oil, gas, power and government segments was surpassed only by record results in 2008. And despite cancellations of over $5 billion and scope reductions during 2009, the company finished the year with a $27 billion backlog. In addition, cash and marketable securities balance grew to $2.6 billion.
 
Guidance
 
The company is beginning to see positive signs of a recovery, as evidenced by the amount of new front-end activity, and expects capital investment levels to gradually rebound as the global economy improves. However, relatively fewer new orders in recent quarters and continuing delays in the full release of major projects are expected to stretch 2010 earnings targets.

Based on a detailed evaluation of the projected impact on affected business segments, the company has reduced the EPS guidance for 2010 to a range of $2.80 to $3.20 per share from the previous range of $3.20 to $3.60.

Fluor Corporation, through its subsidiaries, provides engineering, procurement, construction management, and project management services worldwide. Its Oil & Gas segment offers design, engineering, procurement, construction, and project management services to upstream oil and gas production, downstream refining, and integrated petrochemicals industries. It also provides consulting services comprising feasibility studies, process assessment, and project finance structuring and studies.

We currently have a Neutral recommendation on FLR.

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