Fluor (FLR) To Report Q1 Earnings: What's In The Offing?

Fluor Corporation (NYSE:FLR) is scheduled to report first-quarter 2019 results on May 2. In the last reported quarter, the company’s adjusted earnings of 77 cents per share topped the Zacks Consensus Estimate by 26.2%. Also, the said figure increased 10% from 70 cents per share recorded in the year-ago period.

However, revenues of $4,801 million not only lagged the consensus mark of $4,826 million but also declined 4.5% year over year, mainly due to lower contribution from Energy & Chemicals, Government and Diversified Services segments.

Which Way are Estimates Trending?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for earnings for the quarter to be reported is currently pegged at 54 cents, remaining unchanged over the past 60 days. This indicates a decrease of 3.6% from the year-ago earnings of 56 cents per share. Revenues are expected to be $4.75 billion, down 1.6% year over year.

Fluor Corporation Price and EPS Surprise

Factors at Play

Fluor’s overall business has been witnessing lower level of project execution activity, which might affect the upcoming results. Lower contribution from its Energy & Chemicals, Government and Diversified Services segments added to the woes. This trend is likely to remain a headwind for the to-be-reported quarter as well.

Segment Discussion

Fluor’s Energy & Chemicals segment and Power business line of business have been recording dismal results over the last few quarters. Reduced volume of project execution activity for several chemicals and downstream projects, softness in fixed-price downstream project, reduced volume of project execution activities for several chemicals projects, and foreign exchange losses related to the company’s joint venture in Mexico are expected to impact profitability in first-quarter 2019.

The Zacks Consensus Estimate for Energy & Chemicals revenues of $1,870 million suggests a decrease from $1,943 million in the year-ago quarter. Also, the estimated figure is lower than the reported revenues in fourth-quarter 2018.

The Mining, Industrial, Infrastructure & Power segment currently has a positive first-quarter outlook for the mining infrastructure market. However, reduced level of project execution activity for several power projects, including two nuclear projects that were canceled during 2017, and additional costs related to downstream projects are likely to hamper Fluor’s first-quarter profitability.

The Zacks Consensus Estimate for the segment’s first-quarter revenues is pegged at $1,401 million, implying growth from $910 million in the year-ago quarter but a decrease from $1,549 million sequentially.

Notably, the company’s Diversified Services business has been carrying out work in North America and Europe that is expected to be favorable for the quarter to be reported. Its enhanced maintenance, fabrication and construction capabilities, as well as continuous investment in systems and processes are expected to improve project delivery in the first quarter.

Moreover, revenues from the segment are expected at $662 million versus $643 million a year ago and $613 million in the fourth quarter.

Meanwhile, its Government segment has been performing pretty well. The segment enjoys a solid track record of contracts, and management remains optimistic that the trend will continue in the to-be-reported quarter as well, thereby driving revenues of the company. Major wins in the government business over the last few quarters allowed Fluor to expand long-term recurring revenue opportunities. The trend is expected to have continued in the to-be-reported quarter as well.

The Zacks Consensus Estimate for the segment’s first-quarter revenues of $931 million indicates growth from $801 million in the fourth quarter but a decline from $1,327 million in the year-ago period.

Quantitative Model Prediction

Our proven model does not conclusively show that Fluor, which share space with Quanta Services, Inc. (NYSE:PWR) in the Zacks Engineering - R and D Services industry, is likely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, the company carries a Zacks Rank #3 (Hold). Meanwhile, we caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks With Favorable Combination

Here are some construction stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release:

Jacobs Engineering Group Inc. (NYSE:JEC) has an Earnings ESP of +1.40% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boise Cascade Company (NYSE:BCC) has an Earnings ESP of +1.20% and a Zacks Rank #3.

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