Dive Brief:

• Fluor announced Friday it earned $38 million, or $0.27 per common share, in the first quarter of 2022, a jump from a loss of $87 million in the same period last year.
• The Irving, Texas-based company reported revenue of $3.12 billion, down from $3.35 billion, or about 7%, due to cost growth on advanced manufacturing projects, the completion of a Department of Energy contract in the prior year and the closure of LOGCAP, a U.S. Army program, in Afghanistan. 
• On a non-GAAP adjusted basis, which considered profits from continuing operations, the company earned $27 million, or $0.16 per share. That missed analysts' estimates of $0.22 per share, according to Seeking Alpha, although revenue exceeded expectations by around $20 million. Despite the miss, Fluor maintained its full year earnings guidance for 2022 between $1.15 to $1.40 a share.

Dive Insight:

Fluor’s backlog, or the value of projects won but not yet started, fell to $19.25 billion from $20.80 billion, a drop of about 7%. All of its segments reported a decrease in backlog. 

But the reiteration of its full-year guidance, despite being off analysts' mark for the first three months, effectively raised the company's outlook for the rest of 2022. That was reflected by its shares closing Friday up around 2.5%, compared to mixed trading in the overall market.

Tutor Perini, a competitor, took a similar stance on its earnings call earlier last week in the face of reporting a first quarter loss.  

Fluor is currently working on projects such as the Gordie Howe International Bridge (pictured) and an automated people mover system at the Los Angeles International Airport.  

Segment backlog falls

Backlog fell in all of the firm’s biggest segments. They are:

• Energy Solutions, which focuses on chemicals, fuels and energy. Backlog fell about $800 million, or around 9%, to $8.51 billion. 
• Urban Solutions, which focuses on mining, metals, life sciences and infrastructure, reported a $300 million decline in backlog, or 5%, to $6.69 billion. 
• Mission Solutions, which serves federal agencies in the U.S. government and in other countries, shed about $300 million in backlog, or 11%, dropping to $2.28 billion.

The company said its overall backlog fell because of the steep decline in oil prices that occurred in early 2020. That caused reductions in demand for certain services and the delay or abandonment of anticipated projects, according to the quarterly report. Although oil prices have since rebounded, Fluor reported its energy clients have yet to respond with elevated capital expenditures for services. 

Recent COVID-19 lockdowns of several large cities in China has also impacted the company’s ability to mobilize its workforce and supply chain at its fabrication yard in Zhuhai, China, the company said.

Lastly, the company suspended any new investment into Russia following its invasion of Ukraine, but confirmed turmoil in Eastern Europe should not have any significant impact on operations.  

“We’re at the inflection point on backlog and new awards coming,” said David Constable, CEO of Fluor. “That’s what we need to be focusing on, is that healthy backlog to burn this year.”

Takeaways from earnings

Fluor ended the first quarter with $982 million in debt, wiping out close to $200 million from the same period a year ago. CFO Joe Brennan said in February reducing debt continues to be a top priority for the company this year.

“Fluor’s results were a mixed bag but expectations should have been low,” said Andrew Wittman, senior research analyst at Baird. “Revenues were in line for core segment results.”

Although revenue in its other segments fell, Energy Solutions revenue increased to $1.17 billion, an 18% rise from a year ago. That jump is due to the ramp-up of execution activities on a refinery project in Mexico and an LNG Canada project. 

The company maintains its expectation for overall revenue to increase approximately 10% for the year, said Brennan. 

In addition, NuScale, a modular reactor company in which Fluor is a majority investor, went public through a de-SPAC transaction on the New York Stock Exchange. Fluor owns approximately 57% of the company.