JEC Jacobs Engineering Group Inc

Fluor Corporation(FLR) reported third-quarter 2011 earnings per share of 78 cents, below the Zacks Consensus Estimate of 86 cents. Prior-year loss per share was 30 cents.

Total Revenue

Total revenue was $6.0 billion compared with $5.5 billion in the second quarter of 2010. The 10% growth was aided by the company’s strong position in the market even in the prevailing uncertain macroeconomic environment. The company gained good new awards in the quarter, valued at $6.7 billion versus $7.6 billion in the prior-year quarter. Consolidated backlog at the end of the third quarter was $41.8 billion, reflecting an increase of 27% year over year.           

Segment Revenue

Revenue from Oil & Gas segment was $2.2 billion compared with $1.7 billion in the year-ago quarter, driven by new awards and strong order backlog. New awards won during the quarter were approximately $2.8 billion with backlog amounting to $14.6 billion at the end of the quarter.

Industrial & Infrastructure revenue was $2.4 billion, an increase of 11% year over year as the mining and metals business expanded substantially. New awards won during the quarter were $2.8 billion with backlog amounting to $22.3 billion at the end of the quarter. 

Government segment revenue was $882 million, an increase of 11% year over year, benefiting from revenue due to Portsmouth contract with the Department of Energy and higher volume from LOGCAP IV task orders in Afghanistan. New awards won during the quarter were $1.7 billion with backlog amounting to $1.8 billion at the end of the quarter.

Global Services segment posted revenue of $390 million, a decrease of 7% year over year. In the previous year, the company benefited from substantial volume in the operations and maintenance businesses due to Gulf Coast oil spill cleanup activities. New awards won during the quarter were $302 million with backlog amounting to $2.0 billion at the end of the quarter.

Power segment revenue declined to $143 million from $383 million resulting from prevailing weak demand for new power generation capacity as well as completion of several large projects in prior periods. New awards won during the quarter were $470 million with backlog amounting to $1.1 billion at the end of the quarter.

Income & Expenses

Earnings before taxes were $230.9 million compared with $24.9 million at the end of the prior-year quarter. Total cost and expenses for the quarter amounted to $5.81 billion compared with $5.49 billion.

Operating margin in Oil & Gas segment was 3.5% compared with 4.7% in the prior-year period, Infrastructure & Industrial segment came in at 3.8% compared with negative margin of 1.3%, Government segment was 4.3% compared with 4.7%, Global Services segment was 9.5% compared with 8.7% and Power segment was 12.8% compared with 10.6% in the comparable quarter last year.

Balance Sheet & Cash Flow

Cash and marketable securities, including noncurrent, amounted to $2.76 billion at the end of the quarter compared with $2.61 billion at the end of 2010. Long-term debt was $513.4 million compared with $17.8 million and shareholder’s equity was $3.30 billion compared with $3.50 billion in the year-ago quarter. The company repurchased 4.2 million shares during the third quarter for $241 million.

Outlook

The company lowered its 2011 earnings per share guidance to $3.20 – $3.40 from $3.10 – $3.40. Power segment profit is expected to see continued burden from weak market conditions, leaving which all other segments are believed to varying profits in 2012.

Acting through its subsidiaries, Fluor Corporation is one of the largest professional services firms, providing engineering, procurement, construction and maintenance as well as project management services on a global basis.

It serves a diverse set of industries worldwide including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. It is also a primary service provider to the U.S. federal government.  The company’s prime competitor is Jacob’s Engineering Group (JEC).

We continue to maintain a Neutral rating on Fluor Corporation, with a Zacks #4 Rank (Sell recommendation) over the next one-to-three months.

 
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