Fluor Corporation (FLR) reported second-quarter 2014 earnings from continuing operations of $1.02 per share that came ahead of both the Zacks Consensus Estimate and prior-year quarter earnings of 98 cents by 4.1%. However, including one-time costs of 54 cents, the company reported net earnings of 48 cents.
Total revenue for the quarter decreased substantially by 27.0% year over year to $5.3 billion. The contraction was primarily due to the sluggish performance of the mining and metals business under the Industrial & Infrastructure segment. Revenues fell short of the Zacks Consensus Estimate of $6.1 billion.
The company has been benefiting from the uptrend in the Oil & Gas and Petrochemical sectors. However, prevailing weakness in a number of non-energy-related markets is proving to be a drag on the company’s financials.
In the reported quarter, the company inked contracts worth $5.9 billion. This included $1.5 billion in the Oil & Gas segment, $1.2 billion in Industrial & Infrastructure and $3.1 billion in the Government segment. Consolidated backlog was $40.3 billion at quarter-end, an increase of 9% from $37.0 billion in the second quarter of 2013.
Segment Revenue
Revenues from the Oil & Gas segment remained almost flat year over year at $2.8 billion. New awards for the segment totaled $1.5 billion that includes a Belgium based refinery project. At the end of the quarter, backlog for the Oil & Gas segment grew 29% year over year to $24.2 billion.
Revenues in the Industrial & Infrastructure segment dipped 51.8% year over year to $1.5 billion. Lower revenues reflect continuing weakness in the mining and metals business line, partly offset by growth in the infrastructure business.
New awards for the quarter amounted to $1.2 billion, which includes an engineering, procurement and construction management contract for a U.S. based manufacturing facility. Backlog was $9.2 billion, down 43.0% year over year owing to substantially lower new awards for mining and metals over the past year.
Revenues in the Government segment were down 11.3% to $598.6 million due to the volume reduction in LOGCAP IV task order. New awards totaled $3.1 billion for the quarter, notable among which are a multi-year nuclear decommissioning project based in U.K. and new LOGCAP IV task orders. Backlog at the end of the quarter was $5.2 billion, a robust improvement compared with $531 million recorded in the year-ago quarter and $2.6 billion in the prior-quarter.
Revenues in the Global Services segment declined 6.0% year over year to $145.1 million. The revenues in the quarter were impacted by the reduced mining activity in the equipment business based in Latin America.
The Power Group segment reported a 51.7% decline in quarterly revenues to $204 million. New awards for the quarter totaled $38 million compared with $59 million in the second quarter of 2013 due to the lower demand for new power facilities. Backlog at the end of the second quarter was $1.7 billion, slightly higher than the prior-year quarter’s figure of $1.6 billion.
Other Financial Details
Fluor ended the quarter with cash and marketable securities of $2.7 billion, long-term debt of $ 496.8 million, and shareholders’ equity of $3.6 billion.
Outlook
The company reiterated its earnings guidance for full-year 2014. Encouraged by the strong prospects for growth in Oil & Gas sector, Fluor continues to expect earnings per share in the range of $4.10 to $4.45. The Zacks Consensus Estimate for the same is currently pegged at $4.25.
Zacks Rank
Fluor currently has a Zacks Rank #2 (Buy). Some better-ranked stocks worth considering include The Andersons, Inc. (ANDE), Ashland Inc. (ASH) and North American Palladium Ltd. (PAL), each carrying the same Zacks Rank as Fluor.
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