Fluor Corporation (FLR) reported earnings per share of 65 cents in the fourth quarter of 2010 compared with earnings of 82 cents in the fourth quarter of 2009. This was below the Zacks Consensus Estimate of 75 cents.
The fourth quarter number includes the impact of pre-tax charges of $180 million on the Greater Gabbard Offshore Wind Farm project and $28 million on a gas-fired power plant in Georgia.
Revenues were $5.2 billion, down from $5.4 billion in the fourth quarter of 2009 and lower than the Zacks Consensus Estimate of $5.6 billion.
Fourth quarter new awards were $7.1 billion including awards of $4.4 billion in Oil & Gas and $1.3 billion in Industrial & Infrastructure, more than double of $3.3 billion in the corresponding quarter of 2009.
Segment Details
Fluor’s Oil & Gas unit reported a segment profit of $344 million in 2010, well below its record profits of $730 million in 2009. Revenue declined 35% to $7.7 billion, reflecting low new award levels throughout 2009 and the first half of 2010.
The Industrial & Infrastructure group reported a segment loss of $170 million, compared with a segment profit of $140 million in 2009.
Government posted a segment profit of $142 million, up 22% from $117 million reported a year ago. Improved results primarily reflect increased contributions from LOGCAP IV task orders in Afghanistan.
Segment profit for Global Services rose to $133 million in 2010, compared with $107 million in 2009 which included a $45 million charge for the uncollectability of a receivable on a paper mill revamp project. Revenue decreased by 4% to $1.5 billion, primarily due to reduced levels of equipment leasing activity in Iraq.
Fluor’s Power group reported an 8% increase in segment profit to $171 million, while revenue declined by 5% to $1.7 billion.
Balance Sheet
Fluor witnessed a strong cash flow in the quarter, resulting in cash plus current and non-current marketable securities of $2.5 billion at quarter-end compared with $2.1 billion in the prior quarter and $2.4 billion a year ago. Long-term debt was negligible and shareholders’ equity was $3.5 billion.
Guidance
The company remains encouraged by business opportunities after three consecutive quarters of new award strength and backlog growth, and is maintaining its EPS guidance for 2011 at the previously announced range of $3.00 to $3.40 per diluted share.
Fluor stands out as one of the few engineering and construction companies having the technological expertise, logistics, procurement capabilities and project management experience needed for a large variety of projects, including large 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.
Flour is one of the best-in-class E&C companies with a favorable contract mix, diverse service offerings and strong relationships around the world; allowing it to sustain operating margin going forward relative to its peers without diminishing the growth potential.
These firms believe project wins in the next few quarters will be fraught with intense competition, raising concerns over potential margins on any new awards.
The current worldwide financial crisis will likely affect a portion of its client base, as well as subcontractors and suppliers, and could materially affect its backlog and profits. Backlog is subject to unexpected adjustments and cancellations and, therefore, may not be a reliable indicator of future earnings.
The Industrial & Infrastructure segment provides design, engineering, procurement and construction services, for new construction and refurbishment, to the transportation, wind power, mining and metals, life sciences, telecommunications, manufacturing, commercial and institutional development, microelectronics and healthcare sectors. These projects often require state-of-the-art application of its clients’ processes and intellectual knowledge.
Acting through its subsidiaries, Fluor Corporation is one of the largest professional services firms, providing engineering, procurement, construction and maintenance as well as project management services on a global basis.
It serves a diverse set of industries worldwide including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. It is also a primary services provider to the U.S.federal government. Jacobs Engineering Group Inc (JEC) is a major competitor.
We currently have a Neutral recommendation on Fluor Corporation.
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