Fluor Shares Fall 8% on Weak Earnings
Shares of engineering and construction company Fluor Corp. fell 8% Wednesday after posting weak fiscal third-quarter earnings that included a charge for a project cost overrun and warning that 2000 earnings will fall short of 1999 results.
Fluor also said it will lead a consortium to develop a crude-oil upgrading project in eastern Venezuela in a deal worth more than $1 billion.
The Aliso Viejo company reported that net income for its fiscal third quarter, ended July 31, fell to $33.3 million, or 44 cents a share, including a charge for a project cost overrun and a nonrecurring item. In last year’s third quarter, the company earned $50.2 million, or 66 cents.
Quarterly revenue dropped 6% to $2.9 billion from $3.1 billion last year.
The results were released late Tuesday after the close of business. On Wednesday, Fluor’s stock closed down $2.56 at $29.63 in New York Stock Exchange trading.
Third-quarter results included a pretax provision of $54 million for Fluor Daniel’s portion of a cost overrun on a Duke/Fluor Daniel power project in Dearborn, Mich., bringing Fluor’s share of the loss to $60 million. Duke/Fluor Daniel is a joint venture between Duke Energy and Fluor Daniel.
The company said it is taking “immediate actions,” along with Duke Energy, to determine what went wrong and what steps should be taken to minimize or eliminate the prospect for such overruns in the future.
The nonrecurring item is a pretax credit of $12 million, which amounted to $8.5 million after tax, or 11 cents a share, from the recovery of excise taxes paid on coal export sales tonnage by Fluor’s A.T. Massey Coal enterprise.
With the project overrun and significant weakness in Massey’s results, the company predicted that its operating earnings for the year will be about 15% below last year’s level. Fluor previously announced plans to spin off Massey and its struggling coal-mining business.
In one bright spot for the third quarter, Fluor said, new awards increased 38% to $2.2 billion from $1.6 billion last year. That does not include the $1-billion Hamaca Crude Upgrader project in Venezuela.
Fluor said in a news release that its Fluor Daniel engineering, procurement and construction unit already is working on the Hamaca project under a letter of intent.
The company will book the new award when the definitive project agreements are signed, which is expected within the next 30 days.
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Fluor Fumbles
Fluor stock is off 37% since hitting a 52-week high of $48.50 on Jan. 7.
Fluor shares, monthly closes and latest on and latest on the NYSE
Wednesday: $29.63, down $2.56
Source: Bloomberg News
