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Revenues and profits fell for several of the biggest construction companies, according to figures released for their third quarter, but there was also optimism that fast-growing market sectors will become financial springboards to boost future results.
Fluor Corp. reported a 3.3% increase in revenue to nearly $4.1 billion. But the total still fell short of the analyst consensus of $4.73 billion, with the engineer-contractor citing project impacts and reduced revenue from the energy business. Those factors reduced corporate net income to $54 million from $169 million in the same quarter last year, it said. New awards in the third quarter also totaled $2.7 billion compared to $5 billion in the same quarter last year. CEO David Constable said the expected conversion of front-end design packages to EPC awards “hasn’t been finalized yet”.
But Fluor executives and analysts, and others, see the potential for future outcomes in the energy transition, especially the growing demand for nuclear power brought on by the boom in artificial intelligence. The company announced on November 15 a design contract with AtkinsRealis, Sargent & Lundy and Ansaldo Nucleare for two new reactors in Romania that will double the facility’s output to 2.4 GW and are the first in the entire world since 2007 that use Canadian CANDU technology.
National Bank of Canada analyst Maxim Sytchev said that while the initial contract backlog won’t add to Atkins Realis’ total until the fourth quarter, the current $3 billion in nuclear revenue from the company have increased by 87% since last quarter and by 200% year-on-year. He predicts “double-digit compound annual revenue growth” going forward, but with bursts “due to the inherent lumpiness of the business.”
Fluor said its consolidated backlog increased to $31.3 billion from $26 billion, with 80% of reimbursable contracts. Third-quarter profit of $50 million at the Fluor energy unit reflects a lower-than-expected contribution from its role as a contractor on an unidentified project believed to be the $14 billion first phase of the Canada’s main LNG export terminal in British Columbia.
Reloading
Constable also pointed to a canceled Intel semiconductor plant, but pointed to more work within the project he still has. She is also “pleased that the electoral process has produced a clear winner,” she said. “This creates an environment of certainty that clients need to be able to make important capital investment decisions.” COO Jim Breuer said Fluor is “recharging the hopper with significant initial work, both in traditional and energy transition markets, for a new wave of projects. [that] it will come to fruition”. Truist Securities lead industry analyst Jamie Cook called the shortfalls “unexpected and disappointing” but said “we believe the market that Fluor is executing operationally is missing.”
Electric utility provider Quanta Services reported revenue below market expectations, driven by a 9.1% drop in its underground business, with hurricane-related project delays hitting sales and margins. units.
But those results were offset by strong margins in its renewable energy work, the company said. Sales of renewables rose 28.9% “with strong margins of 9.8% driven by execution,” said Cook, who estimated an increase in total industry margins of 8.6% in 9%, from 8.3% to 8.8% previously. The company “continues to believe it can increase margins in renewables [double-digit percentages] over time, with a strong sequential improvement expected by 2025,” he said.
Quanta reported that the total backlog rose to a record $34 billion in the third quarter, with the company “pursuing billion-dollar projects” that it believes it is “well positioned to win.”
Tutor Perini also reported that the record book of work increased to $14 billion in the third quarter, up 35% from the previous quarter. But project cost disputes on seven major projects led to net charges of about $152 million, leading to a diluted loss of $1.92 per share in the third quarter, it said. While the company noted a positive outcome in several disputes, “two, maybe three were very unexpected and unexplained legal decisions that we strongly disagree with and are appealing,” CEO Ron Tutor said. “We expect to return to profitability in 2025, with stronger earnings expected in 2026,” he added.
For the nine-month period ended September 30, Parsons Corp. reported net income of $34 million on revenue of $5 billion, compared with $116 million on $3.9 billion in the same period in 2023. But net income for the quarter was limited by a reduction in legacy critical infrastructure work that predates the company’s current more disciplined approach to contracts. That work will be substantially completed in the fourth quarter, CEO Carey Smith said. He noted growth in existing critical infrastructure security and cyber markets through new contracts and acquisitions. Future workload includes a growing portfolio of Saudi Arabian projects.
