Fluor Loses Nearly 10% on Earnings Miss

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Fluor (FLR) shares are tumbling $6.90, or 9.8%, to $63.67 in afternoon trading following an earnings disappointment related to an offshore wind farm and decreased activity.

The engineering company said that fourth-quarter* earnings fell to $117 million, or 65 cents a share, from 82 cents a share, in the year-earlier period. Revenue declined to $5.27 billion, from $5.48 billion. On average, analysts had expected Fluor to earn 75 cents a share, on revenue of $5.69 billion. The company also reiterated full year EPS guidance of of $3 to $3.40 a share, below the Street’s forecast of $3.33 a share.

Fluor took a one-time charge of $180 million for the Greater Gabbard Offshore Wind Farm in the quarter, as well as a tax benefit of $152 million.

Citi analyst Richard Roy was cautious about the report, but reiterated his $86 price target. “In our view, the weakness in the shares today reflect investors uneasiness with the nature of the [wind farm] project (i.e. relatively complex project), the type of contract (i.e. fixed price contract) and the potential for additional charges over time,” he wrote in a research note out today. “Indeed, we generally view a complex ‘first in kind’ project (i.e. first UK offshore wind farm built outside of territorial waters) awarded on a fixed price basis to be a cause for concern.”

The company’s oil and gas segment saw reduced activity that also weighed on profits. Yet, new orders more than doubled in the quarter, to $7.09 billion, and* backlog rose $1.9 billion to $34.9 billion, a 30% increase year-over-year.



Original Article Source by Barrons.com