We recently maintained a Neutral recommendation on
Fluor Corporation is a holding company that owns the stock of a
number of subsidiaries. Acting through these subsidiaries, it 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 service provider
to the U.S. federal government. It performs operations and
maintenance activities for major industrial clients, and in some
cases, operate and maintain their equipment fleet.
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. With a proven management
team and a strong balance sheet, Fluor is poised to outperform in
the current market environment.
On February 22, 2012, the company came out with its
fourth-quarter 2011 earnings per share of $0.90, above the Zacks
Consensus Estimate of $0.82. Prior-year loss per share was
For 2011, earnings per share were $3.40, above the Zacks
Consensus Estimate of $3.33 and prior-year earnings per share of
Total revenue was $6.3 billion compared with $5.3 billion in the
fourth quarter of 2010. The 19% growth was aided by a significant
rise in Industrial & Infrastructure business. New awards for
the quarter were $4.3 billion.
For 2011, total revenue was $23.4 billion, up 12% year over
year. The surge was driven by strong growth in the mining and
metals business line within the Industrial and Infrastructure
segment. Consolidated backlog at the end of the year was $39.5
billion, reflecting an increase of 13% year over year.
Though the company's Power segment revenue declined by 56% year
over year in 2011, the fourth-quarter performance was the best in
four years with awards totaling just under $1 billion to $947
million. The decline was due to benefits derived in 2010 from
completion of a number of new projects during the year.
New awards in 2011 continue to be strong at $26.9 billion. The
company benefited from substantial mining & metals volume, as
well as sizable orders within the Oil & Gas segment.
Consolidated backlog rose to a new high of $39.5 billion, an
increase of 13% from the end of 2010. The company's international
marketremained robust, with 84% of awards derived from outside the
US with focus on Australia, the Middle East, Latin America and
Though the company maintained its 2012 earnings guidance and
remains well positioned for growth in its diversified market, the
prevailing uncertain market remains a matter of concern at least
for the first half of the year.
Further, Fluor's government contracts may be terminated at any
point of time if it does not comply with the restrictions and
regulations imposed by the government. Therefore, there are chances
that it will not be able to enter into any government contracts in
future. The termination of government contracts could significantly
reduce its expected revenue and profits. The company's prime
Jacob's Engineering Group
We continue to maintain a Neutral rating on Fluor Corporation,
with a Zacks #3 Rank (Hold recommendation) over the next
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