It has been about a month since the last earnings report for Fluor (FLR). Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fluor due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Fluor's Q3 Earnings & Revenues Miss, Guidance Cut
Fluor Corporation’s third-quarter 2018 earnings came in below analysts’ expectation and also decreased from the year-ago figure. The company reported earnings of 55 cents per share in the quarter, missing the Zacks Consensus Estimate of 58 cents by 5.2%. The reported earnings also declined 13.4% from 67 cents per share recorded in the year-ago period.
Third-quarter revenues came in at $4,658 million, lagging the consensus mark of $4,695 million and also decreasing 5.7% year over year. The downside was mainly due to decrease in revenues from Energy & Chemicals, and Diversified Services segments.
Segment Discussion
Revenues from the Energy & Chemicals segment were down 14% year over year to $1,902.3 million. In the reported quarter, the segment booked new awards of $644 million. Backlog at the end of the quarter amounted to 11.4 billion compared with $16.5 billion a year ago. Operating margin decreased 190 basis points (bps) year over year to 2.6%.
Mining, Industrial, Infrastructure & Power segment's revenues recorded growth of 3.6% year over year to $1,387.3 million. New awards came in at $5.4 billion, including a copper mine in Peru and an international bridge project in Canada. Backlog for the segment at the end of the quarter was $16.5 billion compared with $10.1 billion a year ago. Operating margin expanded 450 bps to 7.3% in the quarter.
Revenues at the Government segment inched up 1.9% year over year to $780.9 million. That said, operating margin grew 20 bps to 4.1% in the quarter. The business received new awards of $3.3 billion in the quarter. Quarter-end backlog was $5.1 billion compared with $3.6 billion recorded a year ago.
Diversified Services revenues decreased 5.8% to $587.5 million on a year-over-year basis. The segment’s new awards came in at $336 million. Quarter-end backlog was $2 billion compared with $2.7 billion a year ago. Operating margin contracted 160 bps to 4.1% in the quarter.
New Awards & Backlog
In the reported quarter, Fluor's total new awards recorded an increase of 152.3% to $9.6 billion on a year-over-year basis, courtesy of improvements in energy and commodity markets, as well as achievements in infrastructure and government business.
At the end of the reported quarter, consolidated backlog was $34.9 billion, up from $32.9 billion in the year-ago quarter. The company expects the improved momentum to continue through the remaining of 2018.
Liquidity & Share Repurchases
As of Sep 30, 2018, Fluor had cash and marketable securities (including non-current assets) of $1,922.8 million, down from $2,078.8 million on Dec 31, 2017. Long-term debt at the end of third-quarter 2018 increased to $1,667.4 million from $1,591.6 million as of Dec 31, 2017.
2018 Guidance
For 2018, it currently expects earnings per share in the range of $1.80-$1.90 versus $2.10-$2.50 expected earlier.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -16.72% due to these changes.
VGM Scores
Currently, Fluor has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Fluor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Fluor Corporation (NYSE:FLR
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