In its just-announced third-quarter 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.
They combined to reduce corporate net income to $54 million, from $169 million in the same quarter last year, the Irving, Texas-based company said.
But Fluor executives and analysts are optimistic about its future market potential in the still-changing energy market and the looming Trump administration.
While third-quarter new awards totaled $2.7 billion compared with $5 billion in the same quarter last year, Fluor said, its consolidated backlog grew to $31.3 billion from $26 billion, with 80% of that under reimbursable contracts. The engineer-contractor said its “legacy” fixed-price project backlog is down to $859 million from $1 billion last quarter.
The company is “delighted that the election process has produced a clear winner,” chief executive David Constable said. “This creates an environment of certainty that our clients need to make important capital investment decisions.”
Chief Operating Officer Jim Breuer said Fluor is “recharging the hopper with significant early work, both in traditional markets and in the energy transition. Developing a very deliberate strategy around power and energy low carbon and a new wave of projects. [that] it will come to fruition”.
Acknowledging the drop in adjusted earnings per share to $0.51 from $1.02 in the third quarter of 2023, Constable said: “It does not change our focus on pursuing demand-driven growth opportunities in the markets we serve and to return cash to shareholders”.
The increase in the EPC premium has been delayed
Fluor’s energy unit’s third-quarter profit of $50 million reflected a lower-than-expected contribution from its role as contractor in what is believed to be the $14 billion first phase of the gas terminal liquefied natural gas from LNGCanada in British Columbia. This project will be completed next year.
Constable said it is “on track to … send the first payloads in 2025 [and] continues to meet management’s expectations.” The third-quarter profit also reflects an $18 million increase in costs on a project in Mexico.
Constable also noted a cancellation of a semiconductor project by Intel, on which Fluor had been doing early construction. “It was a mega project, but we’re still working on that specific site, and there’s additional work within the project that we’re currently completing,” he said, noting other work for the tech giant being explored in the U.S. and united asia
Fluor’s results were also hurt by what it called a slowdown in the energy transition in North America and continued tougher discretion in selecting projects for the company.
“The intended conversion of FEED packages to EPC awards has not yet been finalized,” he said, adding that “over the past three years, we have not made any bids” for more than $20 billion. [energy projects] due to risk or unfavorable contractual conditions”.
Constable says traditional energy, energy transition and low-carbon energy projects will “drive the FEED packages”. He sees better energy transition potential in Europe, with four of Fluor’s five ongoing EPCM projects located there. “I think the energy transition in the U.S. is going to turn toward the addition of energy … driven by multiple fuel sources, thermal energy, thermal energy with carbon capture and nuclear.”
With increased demand for nuclear power, spurred especially by the data center boom, Constable sees growth for Fluor in both new and resurrected reactor project construction. “The size and supply chain requirements of these megafacilities represent a sweet spot for Fluor,” he said. The company is “developing innovative cooling process concepts and has completed work on the customer’s off-site modularization design and production processes that will accelerate construction.”
Fluor also owns 50% of small nuclear reactor development leader NuScale Power, which is ahead of competitors in securing federal approvals and recently announced improved earnings results.
KeyBanc analyst Sangita Jain described Fluor’s quarterly results as “disorder and unpredictability that investors have been looking to ride through.” But others are more optimistic. Truist Securities’ lead industry analyst Jamie Cook called the third-quarter shortfalls “unexpected and disappointing,” but said “we believe the market is not operationally executing Fluor.” 50% participation in 2025.
Andrew Wittmann, principal industry analyst at Baird Research, said he would maintain an “outperform” rating on Fluor, which is “well positioned to grow the backlog on better terms and conditions and should still include potential for power generation / data center opportunity that accelerates [earnings per share] growth”.
