Shares of diversified construction and engineering company Fluor (NYSE: FLR) plunged 25% after it reported disappointing Q2 earnings numbers and lowered its guidance on Aug. 1.
Fluor’s stock had a rocky start to the year. And just when it had finally climbed out of the hole, the Q2 earnings report sent shares reeling.
Can it get back on track?
Analysts were expecting Q2 revenue of around $4.7 billion and per-share earnings of $0.56. Instead, Fluor reported Q2 revenue of just $3.98 billion: a 15% miss, and a year-over-year decline of 5.9%. Adjusted per-share earnings were even worse, at $0.43: a 23% miss, down 49% (yikes!) from the year-ago quarter.
Even beyond the marquee numbers, the quarter was painful. The value of newly awarded contracts in Q2 was just $1.8 billion, down 43%. The company’s backlog of projects also shrank 13% over the past year, from $32.3 billion to $28.2 billion.
Perhaps the only highlight of Fluor’s Q2 earnings report was from its majority stake in nuclear start-up NuScale Power (NYSE: SMR). When Fluor reported earnings, NuScale’s shares had skyrocketed more than 150% year to date. That represented $3.2 billion in pre-tax mark-to-market gains on Fluor’s NuScale investment, which was included in its equity-method earnings calculation.
Adding insult to injury, Fluor also significantly reduced annual guidance. It had been calling for $575 million to $675 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) and $2.25 to $2.75 in earnings per share (EPS). Now it expects just $475 million to $525 million in EBITDA and $1.95 to $2.15 in EPS. The company cited “client hesitation around economic uncertainty” for the declines.
As bad as things are right now for Fluor, the company’s long-term prospects look good, with a $28.2 billion project backlog that’s 80% reimbursable, insulating it somewhat from clients who get cold feet. But investors should expect more near-term pain.
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