On Dec 5, we maintained our Neutral recommendation on
(FLR) given our concerns about the company's moderate
third-quarter earnings performance.
The company is expected to benefit from growing demand for
energy. Clients will continue to invest in new and upgraded
capacity to meet that demand. However, we are concerned about the
company's mining and metals business, which has been witnessing
declining revenues due to lower orders. In addition, the company
also reported lower order growth year over year.
Why the Reiteration?
On Nov 1, Fluor Corporation reported third-quarter 2013 net
earnings of $173 million or $1.05 per share, beating the Zacks
Consensus Estimate of $1.03 by 2 cents. Quarterly earnings
increased 19.3% from $145 million in the year-ago quarter, while
earnings per share rose 22.1% from 86 cents. Profits during the
third quarter were primarily driven by growth in the Oil &
Gas, Government and Power segments, partially offset by the
sluggish mining and metals businesses.
Total revenue came in at $6.7 billion, compared with $7.1
billion in third-quarter 2012. Growth in the Oil & Gas
segment was offset by the sluggish performance of the Industrial
& Infrastructure segment. Revenues fell short of the Zacks
Consensus Estimate of $7.3 billion.
Following the release of the third-quarter results, the Zacks
Consensus Estimate for fiscal 2013 remained stagnant at $4.03 per
share, while the Zacks Consensus Estimate for fiscal 2014 rose
0.2% to $4.40 per share.
During the last reported quarter, the company reported revenue
increase in only two of its five segments. The top line primarily
benefited from a significant rise in Oil & Gas (13.3% revenue
growth) and Power (77.5%) revenues. This was fully offset by
declines in the other three segments. The company's metals and
mining business continues to remain a drag.
The company narrowed its guidance for full-year 2013 due to a
lack of growth opportunities in the company's mining and metals
business line. The company now expects 2013 earnings in the range
of $3.90-$4.10 per share, down from its earlier guidance of
The company expects 2014 EPS in the range of $4.10 to $4.60
per share, driven by increasing opportunities in Oil & Gas
segment, partially offset by the Government and mining and metals
Currently, Fluor retains a Zacks Rank #3 (Hold). However, some
better-ranked energy and utility stocks include
AO Smith Corp.
(ENS). All these stocks carry a Zacks Rank #1 (Strong Buy).
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