Fluor Corporation (FLR) reported fourth-quarter and full-fiscal 2013 results yesterday on Feb, 18, after market closed. The company reported fourth-quarter net earnings of $167 million or $1.01 per share, beating the Zacks Consensus Estimate of 98 cents by 3.1%. During the fourth quarter of 2012, the company reported a loss of $4 million or 3 cents per share.
Profits during the fourth quarter of 2013 primarily driven by growth in the Oil & Gas as well as the Government and Global services, were partially offset by the sluggish mining and metals business.
For fiscal 2013, the company reported earnings of $688 million or $4.06 a share, which also surpassed the Zacks Consensus Estimate of $4.03 a share by 0.7%. Annual earnings were also up from the prior-year earnings of $456 million or $2.71 a share. Strong performance in the Oil & Gas, Power and Government segments drove the top-line growth.
Total Revenue
Total revenue for the fourth quarter came in at $6.3 billion, compared with $7.0 billion in fourth-quarter of 2012, reflecting a 10.4% decline. The contraction was primarily attributable to the sluggish performance of the mining and metals business under the Industrial & Infrastructure segment. Revenues fell short of the Zacks Consensus Estimate of $6.7 billion.
In the reported quarter, the company inked contracts worth $5.8 billion. This included $4.2 billion in the Oil & Gas segment and $1.1 billion in the Government segment. Consolidated backlog was $34.9 billion at quarter-end, down from $38.2 billion in the fourth quarter of 2012, primarily due to the downturn in the mining and metals market.
For full-year 2013, consolidated revenue declined marginally by 0.8% to $27.4 billion from $27.6 million in fiscal 2012. The decline was attributable to weakness in the Industrial & Infrastructure, Government and Global services, partially offset by strong growth in the Oil & Gas and Power segments.
New awards for fiscal 2013 were $25.1 billion, comprising $12.9 billion in Oil & Gas, $6.6 billion in Industrial & Infrastructure, $4.1 billion in Government and $1.5 billion in Power. Consolidated backlog at end of the year was $34.9 billion, compared with $38.2 billion a year ago, reflecting a continued decline in awards in the mining and metals business and cancellation of a large copper/gold project in South America in the fourth-quarter.
Segment Revenue
Revenues from the Oil & Gas segment reported year-over-year growth of 14.3% to $3.0 billion, while segment profits rose 35.1% to $121.6 million. Revenues were primarily driven by increased contributions from upstream and petrochemical projects. In the fourth quarter, the segment booked new awards of $4.2 billion, including the North West Redwater refinery upgrader project in Canada and additional scope on a major upstream gas processing project in Kazakhstan.
For fiscal 2013, the segment reported 21% increase in revenue to $11.5 billion. For the full year, new awards totaled $12.9 billion, compared with $12.6 billion in 2012, while backlog grew 10% from a year ago to $20.0 billion.
Revenues in the Industrial & Infrastructure segment came in at $2.2 billion, down from $3.1 billion in the past year, with segment profit coming in at $87.4 million compared with a loss of $213.1 million in the fourth quarter of 2012. The declines in revenues and profits were due to lackluster performance from the mining and metals business line contrary to healthy performance of the industrial services and infrastructure businesses in the quarter.
New awards in the fourth quarter amounted to $340 million including a number of maintenance contract renewals. Backlog at the end of the year declined to $10.5 billion from $17.2 billion a year ago, resulting from lesser new awards in mining and metals and the cancellation of a large copper/gold project in the fourth quarter which totaled $1.8 billion.
For fiscal 2013, total revenue for the segment declined 16% to $11.1 billion, primarily due to lower contributions from the mining and metals business line. However, the segment profit increased 169% to $476 million from $177 million in 2012. Segment profit essentially reflects favorable performance of the industrial services business, offset by a decline in mining and metals. New awards in 2013 were valued at $6.6 billion, including approximately $2 billion in infrastructure and $3 billion in mining and metals awards, down from a total of $10.4 billion in 2012.
The Government segment reported a year-over-year revenue decline of 18.3% to $648.1 million. However, the segment’s profit increased 33.4% year over year to $68.7 million. For the quarter, new awards were worth $1.1 billion, which included $983 million for the unfunded portion of multi-year government contracts at Savannah River and Portsmouth.
The Government group reported revenues of $2.7 billion, declining 18.2% year over year from $3.3 billion. Lower revenues were primarily attributable to a reduction in task order volume in the LOGCAP IV contract in Afghanistan. The segment profit was up 7.3% to $161 million from $150 million a year ago, driven by contributions of $57 million from the favorable resolution of several issues that spanned multiple years.
New awards for 2013 amounted to $4.1 billion for the year, compared with $3.2 billion in 2012. Backlog at the end of the year was $2.4 billion, including $983 million for the unfunded portion of multi-year contracts.
Revenues in the Global Services segment for the fourth quarter reduced 10.6% to $157.8 million, while the segment’s profit improved to $39.9 million from $25.2 million in the past year.
For the full year, revenues for the segment declined 10% to $612 million, due to lower contributions from the equipment business line. Segment profit was $120 million in 2013, including expenses of approximately $5 million related to the company’s construction and fabrication initiatives.
Power Group segment, for the fourth quarter, reported revenues of $281.9 million compared with $290.6 million in the past year, marginally declining by 3%. The segment’s profit increased to $0.3 million from a loss of $2.5 million in the prior-year quarter. New contracts in the quarter totaled $146 million, which included early engineering on a proposed nuclear facility and renewal of several power maintenance contracts.
For 2013, Power Group reported revenue growth of 65% to $1.4 billion compared with $841 million a year ago. The revenue increase was attributable to construction progress on solar and gas-fired projects. For the year, the segment recorded profit of $12 million which included expenses of $53 million, associated with the company’s continued investment in NuScale. New awards for the year were worth $1.5 billion, compared with $884 million a year ago, while backlog was $2.0 billion, compared with $1.9 billion a year ago.
Balance Sheet
Exiting the year, cash and marketable securities, amounted to $2.7 billion versus $2.6 billion as on Dec 31, 2012. The long-term debt also reduced to $496.5 million from $520.2 million at year-end 2012. Shareholders’ equity increased to $3.8 billion form $3.3 billion on Dec 31, 2012. However, the debt-to-capitalization ratio reduced to 12.1% from 13.9% in Dec, 2012.
Revised Outlook
Fluor is positive about its strong prospects for continued growth, especially in Oil & Gas. However, the company is reiterating its previously announced range of $4.10–$4.60 per diluted share as its EPS guidance for 2014.
Fluor currently holds a Zacks Rank #2 (Buy). Other stocks worth considering in the sector include AECOM Technology Corp. (ACM), Quanta Services, Inc. (PWR) and Orion Marine Group Inc. (ORN), all of which carry a Zacks Rank #2.
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