Fluor Downplays Drop in Quarterly Earnings

Engineering and construction giant Fluor Corp. said Wednesday its net earnings fell 20% in the third quarter, dipping slightly below Wall Street expectations, but that the company is on track to meet its earnings target for the year.

The Aliso Viejo-based company said it earned $50.2 million, or 66 cents per share, for the quarter ended July 31, down from $62.4 million, or 81 cents per share, for the same quarter a year ago. Wall Street analysts were anticipating earnings of 67 cents per share for this year’s third quarter, according to a poll by First Call/Thomson Financial.

Revenue declined 11.5% to $3.1 billion from $3.5 billion. The company noted that engineering and construction contract awards fell more than $1 billion, and that the coal sector posted disappointing results.

New engineering and construction awards for the quarter were $1.6 billion, compared with $2.7 billion a year ago. Backlog at the end of the third quarter was $9.1 billion, compared with $13.7 billion in 1998, Fluor said, without explanation.

A.T. Massey, Fluor’s low-sulfur coal business, posted operating profits of $34 million, down from $44 million in 1998. The decline was primarily due to continuing difficult market conditions, resulting in lower prices and a less favorable sales mix compared with a year ago.

But external market conditions for several of Fluor’s businesses are improving, Chairman and Chief Executive Officer Philip Carroll Jr. said.

“Our third-quarter results are consistent with the company’s expectation and we remain on track for achieving our annual earnings target of $2.65 per share, excluding the special provision in the second quarter of 1999.” Fluor took a second-quarter charge of $119.8 million to cut 5,000 jobs, close 15 offices and break the company into four business groups.

For the year, analysts are estimating earnings of $2.66 a share.

Carroll said strengthening oil prices and increased client confidence in the economic stability of Asia and Latin America are creating increased optimism for new awards and backlog during fiscal year 2000.

In addition, based on the current improving external environment, the company now expects annual earnings in 2000 to be at least level with 1999 or to grow modestly.

Fluor said the company has completed about 75% to 80% of its cost-reduction program, including closing 11 offices and eliminating 3,300 personnel.

The stock closed Wednesday at $41.75 a share, off 6 cents, in trading on the New York Stock Exchange.