Fluor (FLR) Beats Earnings and Revenue Estimates in Q4

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Fluor CorporationFLR posted its second consecutive earnings beat as the company's fourth-quarter 2016 adjusted earnings from continuing operations of 82 cents per share beat the Zacks Consensus Estimate of 80 cents by 2.5%.

Also, the figure rose 20.6% from the prior-year tally of 68 cents. Decent top-line growth proved conducive to the earnings performance.

For full-year 2016, Fluor's adjusted earnings from continuing operations came in at $2.32 per share, down 18.6% from the prior year.

Inside the Headlines

Fourth-quarter revenues came in at $4,989.6 million, up 14.2% year over year. Also, it topped the Zacks Consensus Estimate of $4,834 million. Strong revenue gains from Industrial, Infrastructure & Power and Maintenance, Modification & Asset Integrity segments more than offset the revenue decline at the Energy, Chemicals & Mining segment, thus resulting in sturdy top-line performance.

For full-year 2016, the company's total sales totaled $19.0 billion, up 5% from the year-ago tally.

Revenues from the Energy, Chemicals & Mining segment continued to decline, falling 11% year over year to $2,509.1 million. Softness in mining activities proved to be an overhang.

Industrial, Infrastructure & Power segment's revenues posted another sound quarter, with revenues soaring 107.8% year over year to $1,122.9 million. Sales at this segment largely benefited from increased project activity in the power business line.

Revenues at the Government segment were up 7.3% year over year to $694.9 million, mainly on account of profitable project wins and execution.

Maintenance, Modification & Asset Integrity revenues rose an impressive 81.8% to $662.7 million on a year-over-year basis. This segment largely benefited from the Stork buyout that boosted sales at the Global Services unit.

For the reported quarter, Fluor's new awards were down 64.1% to $2.8 billion on a year-over-year basis. Orders at the Industrial, Infrastructure & Power segment were $1.3 billion, including a contract for the Novo Nordisk active pharmaceutical ingredient facility in North Carolina. The orders in the government business came in at $101 million.

Orders at the Energy, Chemicals & Mining segment totaled $1.06 billion, including the bauxite mine in Guinea. Orders at the Maintenance, Modification & Asset Integrity segment grossed $357 million.

Consolidated backlog at the end of the year was $45.0 billion, up from $44.7 billion in the year-ago quarter.

Fluor Corporation Price, Consensus and EPS Surprise

Fluor Corporation Price, Consensus and EPS Surprise | Fluor Corporation Quote

Liquidity & Shares Repurchases

As of Dec 31, 2016, Fluor had cash and marketable securities (including non-current) of $2,105.0 million, down from $2,367.6 million as on Dec 31, 2015. Long-term debt at the end of fourth-quarter 2016 rose to $1,517.9 million from $986.6 million as on Dec 31, 2015.

2017 Guidance

Concurrent with the fourth-quarter 2016 results, the company reiterated its 2017 guidance. For full-year 2017, the company projects earnings per share in the range of $2.75-$3.25. The company believes that most of its opportunities in Infrastructure, Industrial and Government segments will continue to be offset by weak commodity business.

To Conclude

Fluor's top and bottom line beats amid tough market conditions highlights its business model strength that has helped brave major headwinds. Major investments made in 2016, including the acquisition of Stork, outlay in a fabrication facility in China and the submission of NuScale's small modular reactor application to the NRC are expected to boost growth. We believe the company's restructuring initiatives, industry-leading franchise within the U.S., diligent management and proven business model will boost growth.

On the flip side, sluggish backlog conversion problem has been a persistent problem in the sector, mainly attributable to uncertain macroeconomic conditions. We believe that lower commodity prices and the consequent cautious investment decisions on part of clients will significantly mar growth. Irrational bidding in feed pricing adds to the concerns of this Zacks Rank #3 (Hold) company.

Stocks to Consider

Better-ranked stocks in the broader sector include Chart Industries Inc. GTLS , II-VI Incorporated IIVI and Applied Industrial Technologies Inc. AIT . While Chart Industries and II-VI Incorporated sport a Zacks Rank #1 (Strong Buy), Applied Industrial carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Chart Industries has an impressive positive average earnings surprise of 548.5% for the trailing four quarters, beating estimates all through.

II-VI Incorporated has registered a remarkable positive average surprise of over 59.2% for the last four quarters, driven by four back-to-back beats.

Applied Industrial Technologies has managed to beat estimates thrice in the trailing four quarters, the average positive earnings surprise being 6.2%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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