Fluor: Navigating Q3 Challenges and Opportunities

Fluor Corporation (NYSE: FLR) reported its third-quarter 2024 earnings on November 8, 2024, with revenue of $4.1 billion and net earnings of $54 million, or $0.31 per diluted share. The company's earnings fell short of Wall Street expectations, with analysts predicting earnings of $0.51 per share. Fluor's consolidated segment profit was $117 million, down from $276 million in the same quarter last year. Excluding adjustments, Fluor recognized adjusted earnings per diluted share of $0.51. The company's cash and marketable securities at the end of the quarter were $2.9 billion, excluding amounts held by NuScale. Fluor's board of directors approved an increase in the share repurchase program to 30.5 million shares, supporting management's capital allocation program.

Fluor's Q3 earnings were impacted by lower-than-expected contributions from the Energy Solutions segment, which reported a profit of $50 million, compared to $177 million in the third quarter of 2023. The segment's results reflect lower than expected contributions from a large project in the late stages of execution and $18 million in cost growth on a construction only subcontract executed by the company's joint venture in Mexico. Excluding adjustments outlined in the reconciliation table at the end of this release, the company recognized adjusted earnings per diluted share of $0.51.

The company's cash and marketable securities at the end of the quarter were $2.9 billion, excluding amounts held by NuScale. Fluor's full year adjusted EPS guidance was tightened from a range of $2.50 to $3.00 per diluted share to a range of $2.55 to $2.75 per diluted share. Adjusted EPS guidance excludes the benefit of any potential share repurchases. The company is also decreasing its full year adjusted EBITDA guidance from the previous range of $625 to $675 million to a range of $525 to $575 million. This revised guidance reflects the timing of revenue and cancellation of certain projects.

Fluor's Energy Solutions segment reported a profit of $50 million in the third quarter compared to $177 million in the third quarter of 2023. Segment profit for the quarter reflect lower than expected contributions from a large project in the late stages of execution and $18 million in cost growth on a construction only subcontract executed by the company's joint venture in Mexico. Segment profit from last year benefitted from the initial recognition of cost recovery entitlements on several projects. Revenue for the quarter was $1.4 billion compared to $1.6 billion a year ago. New awards in the quarter totaled $1.5 billion, compared to $3.3 billion in the third quarter of 2023 and included the full notice to proceed on a downstream project in Mexico. Ending backlog was $8.8 billion compared to $9.2 billion a year ago.

Fluor's Urban Solutions segment reported a profit of $68 million in the third quarter compared to $66 million in the third quarter of 2023. Revenue for the third quarter increased to $1.9 billion from $1.4 billion a year ago. New awards for the quarter were $828 million compared to $1.0 billion a year ago and included incremental awards for a rare earth refinery in Australia and a life sciences facility in the United States. Ending backlog was $19.0 billion compared to $11.1 billion a year ago.

Fluor's Mission Solutions segment reported a profit of $45 million in the third quarter compared to $38 million in the third quarter of 2023. Segment profit improved as a result of increased execution activities on two DOE contracts. Revenue for the third quarter was $635 million compared to $655 million a year ago. New awards for the quarter totaled $274 million, compared to $345 million in the third quarter of 2023. Ending backlog was $3.1 billion compared to $4.6 billion a year ago.

The Other segment, which includes Stork and Fluor's ownership in NuScale, reported revenue of $100 million and a loss of $46 million. Beginning in October 2024, the company's ownership of NuScale no longer meets the qualifications for consolidation by Fluor. As a result, in the fourth quarter, the company will deconsolidate NuScale and recognize a gain of $1.6 billion for its 126 million shares. The company expects to complete the sale of Stork's U.K. operations as early as the first quarter of 2025, pending regulatory approval.

Fluor will host a conference call at 8:30 a.m. Eastern on Friday, November 8, which will be webcast live and can be accessed by logging onto investor.fluor.com. The call will also be accessible by telephone at 888-800-3960 (U.S./Canada) or +1 646-307-1852. The conference ID is 4438700.

A replay of the webcast will be available for 30 days.

Fluor's Q3 earnings reflect a challenging quarter for the company, with lower-than-expected contributions from the Energy Solutions segment. However, the company's strong cash flow generation and increased guidance for the year reflect its robust business model and growth potential. With a positive outlook from management, investors should closely monitor Fluor's progress in the coming quarters.