Fluor's (FLR) Q4 Earnings Beat Estimates, New Awards Strong

Fluor Corporation’s (NYSE:FLR) fourth-quarter 2018 earnings surpassed the Zacks Consensus Estimate and increased from the year-ago level. The company reported adjusted earnings of 77 cents per share in the quarter, beating the consensus mark of 61 cents by 26.2%. The reported earnings increased 10% from 70 cents per share recorded in the year-ago period.

Fourth-quarter revenues came in at $4,801 million, lagging the consensus mark of $4,826 million by 0.5% and decreasing 4.5% year over year. The downside was mainly caused by lower contribution from Energy & Chemicals, Government and Diversified Services segments.

Segment Discussion

Revenues from the Energy & Chemicals segment were down 11.4% year over year to $1,838.4 million. In the reported quarter, the segment booked new awards worth $8,783 million, significantly higher than $977 million a year ago. Backlog at the end of the quarter amounted to $17.8 billion compared with $15.1 billion a year ago. Operating margin decreased 100 basis points (bps) year over year to 4.6%.

Mining, Industrial, Infrastructure & Power segment's revenues recorded 20.5% year-over-year growth to $1,549 million. New awards came in at $438 million, down from $637 million in the fourth quarter of 2017. The segment’s backlog at the end of the quarter was $15.3 billion compared with $9.6 billion a year ago. Operating margin improved to 0.9% from a negative 0.8% a year ago.

Revenues at the Government segment declined 16.4% year over year to $800.5 million. Also, operating margin contracted 220 bps to 2.94.1% in the quarter. The business received new awards of $33 million in the quarter, significantly lower than the year-ago level of $1,053 million. Quarter-end backlog was $4.6 billion compared with $3.8 billion a year ago.

Diversified Services revenues decreased 13.6% on a year-over-year basis to $613.1 million. The segment’s new awards came in at $856 million, up from $568 million in the year-earlier period. Quarter-end backlog was $2.3 billion compared with $2.5 billion a year ago. Operating margin contracted 100 bps to 4.5% in the quarter.

New Awards & Backlog

In the reported quarter, Fluor's total new awards recorded an increase of 212.2% on a year-over-year basis to $10.1 billion. Full-year new awards more than doubled to $27.7 billion, comprising $10.6 billion in Energy & Chemicals; $10.8 billion in Mining, Industrial, Infrastructure & Power; $4.1 billion in Government and $2.1 billion in Diversified Services.

At the end of 2018, consolidated backlog was $40 billion, up from $30.9 billion in the year-ago quarter.

2018 Highlights

Adjusted earnings came in at $2.15 per share compared with $1.63 a year ago. Full-year 2018 total revenues of $19.2 billion were down from $19.5 billion in 2017. Consolidated segment profit was $602 million, up from $545 million a year ago.

Liquidity & Share Repurchases

As of Dec 31, 2018, Fluor had cash and marketable securities (including non-current assets) of $1,979.6 million, down from $2,078.8 million in the comparable period of 2017. Long-term debt at the end of 2018 increased to $1,661.6 million from $1,591.6 million on Dec 31, 2017.

2019 Guidance

For 2019, it currently expects earnings per share in the range of $2.50-$3.00.

Zacks Rank & Stocks to Consider

Currently, Fluor carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Construction sector are Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) , Comfort Systems USA, Inc. (NYSE:FIX) and EMCOR Group, Inc. (NYSE:EME) . While Great Lakes sports a Zacks Rank #1, both EMCOR and Comfort Systems carry a Zacks Rank #2 (Buy).

Great Lakes’ earnings are expected to grow 1,400% in 2019.

Comfort Systems has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in three of the last four quarters, with the average positive surprise being 16.5%.

EMCOR has a strong record of earnings surprises, having surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average being 19.1%.

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