Tuesday, February 22, 2011

Fluor Corporation (NYSE: FLR): Q4 Earnings Preview 2010

Fluor Corporation (NYSE: FLR) is scheduled to release its fourth-quarter earnings before the opening bell on Wednesday, Ferbruary 23, 2011. Analysts, on average, expect the company to report earnings of 75 cents per share on revenue of $5.66 billion. In the year ago quarter, the company reported earnings of 82 cents per share on revenue of $5.48 billion.

Fluor Corporation, through its subsidiaries, provides engineering, procurement, construction, maintenance, and project management services worldwide.

In the preceding third quarter, the Irving, Texas-based company's net loss was $54 million, or 30 cents a share, compared with a profit of $162 million, or 89 cents a share, in the same quarter last year. Revenue grew 2% to $5.51 billion from $5.42 billion. Analysts, on average, expected the company to post a loss of 22 cents per share on revenue of $5.21 billion. 

At its last earnings call in November, the company reaffirmed its 2010 earnings outlook of $1.90 to $2.20 per share, including the impact of charges relating to the Greater Gabbard and SR-125 projects. For 2011, the company said growing backlog should drive up revenue and result in a profit of $3 to $3.40 per share. 

Like all infrastructure companies, Fluor rises with a recovering economy – higher energy prices and accelerated construction projects are core of the business. The two macroeconomic factors to watch to gauge Fluor’s growth potential are oil prices and the U.S. dollar. As long as oil prices rise, the rising tide will raise all boats in the commodities market, and a weak U.S. dollar will boost Fluor’s revenue, on account of half of its earnings coming from international markets. With Brent Crude futures hovering near $100 a barrel and the U.S. dollar continuing to decline due to Bernanke’s Quantitative Easing, the coast is clear for Fluor to continue its growth. New CEO David Seaton has made the bold claim that sales, profit and order backlog should all reach twice their current levels in the next 10 years. Seaton who formally took over early this month after being designated in 2010 as CEO Alan Boeckmann’s successor. Seaton said he plans to build on Boeckmann’s strategy of beefing up the mining unit and expanding in China and Australia, which helped more than double annual sales during a nine-year tenure to $22 billion in 2009. The company also will focus more on doing its own construction work rather than management-only jobs, and hire employees instead of contractors.

Fluor stands out as one of the few engineering and construction companies that has the technological expertise, logistics and procurement capabilities, and project management experience needed to execute a large variety of projects, including large and complex projects for a diverse group of industrial and government clients virtually anywhere in the world. The company is well positioned to benefit from increased spending in the energy complex.

Fluor continues to win large projects and may report a backlog at the end of the fourth quarter near its record high. Last month, Fluor secured a $3.5 billion contract to construct an Australian liquified natural gas project, which has raised its profile in an area traditionally dominated by large Australian and Asian players.

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