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Fluor (FLR) Stock Down 15% Post Dismal Q3 Preliminary Results


Fluor Corporation FLR disappointed investors with dismal third-quarter 2018 preliminary results. Following the news, shares of the company declined more than 15% in after-hours trading on Oct 10. In the past six months, the stock has declined 7.4% against the industry’s 6.6% growth.

Furthermore, the company anticipates third-quarter revenues to be nearly $4.6 billion, lower than the Zacks Consensus Estimate of $4.99 billion. This compares unfavorably with the prior-year quarter revenues of $4.94 billion. Fluor expects new awards of roughly $9 billion. Also, Fluor has a solid track record of receiving awards. Management remains optimistic about continuation of this trend in future, which is expected to boost the company’s growth.

Pre-tax earnings are expected to come in at approximately $125 million. Notably, the company’s third-quarter preliminary results include pre-tax charges of $46 million pertaining to close out efforts on a downstream project in Europe and $35 million for estimated revisions on a gas-fired power project in Citrus County, Florida. Preliminary results also comprise of $124 million pre-tax benefit owing to the sale of Seagreen offshore investment.

Despite the bleak preliminary results, Fluor expects to make a turnaround in 2019. The company is slated to report third-quarter 2018 results on Nov 1, 2018.

Solid Long-term Prospects

We expect the company’s long-term prospects to remain strong backed by existing growth opportunities in renewable energy, gas-fired combined cycle generation and air emissions compliance projects for existing coal-fired power plants.

Additionally, Fluor’s market diversity acts as a key catalyst and helps it mitigate the cyclicality of markets in which the company operates. Also, the company’s strategy of maintaining a good business portfolio mix permits it to focus on more stable business markets and capitalize on developing the cyclical markets at suitable times.

Currently, this Zacks Rank #1 (Strong Buy) company is focusing on transforming its EPC model into the one integrated solution. Fluor believes that this will help in expanding its scope of work on a project, improve client satisfaction and provide an opportunity to generate greater returns. Moving ahead, it has plans to implement data analytics to projects, minimize risks and maximize returns. These initiatives should give Fluor an extra edge and a distinct competitive advantage.

Key Picks

Some other top-ranked stocks in the same space are KBR, Inc. KBR, Apergy Corporation APY and Altair Engineering Inc. ALTR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KBR has an expected earnings growth rate of 11.4% for the current year.

Shares of Apergy have gained more than 13% in the past six months.

Altair Engineering has reported better-than-expected earnings over the past three quarters.

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