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What happened

Construction company Fluor Corporation (NYSE:FLR) took it on the chin this morning after reporting a big earnings miss on its fiscal third-quarter earnings report Thursday. As of 12:15 p.m. EDT, Fluor shares were down a whopping 13.4%.

Why? Earnings from continuing operations, which analysts had been predicting would come in at a healthy $0.87 per share, in fact amounted to just $0.03 per diluted share -- down 97.5% from last year's Q3. Revenue missed as well, albeit more modestly. Up 9% year over year at $4.8 billion, revenue nonetheless fell short of analysts' predicted $5 billion.

So what

How did Fluor turn a modest increase in revenue into a vaporization of its profits stream? Most of the damage stemmed from a massive $1.10-per-share after-tax charge to earnings "for estimated cost increases on a petrochemical facility in the United States." But even without that charge, earnings would have been down year over year.

Fluor CEO David Seaton pronounced himself "very disappointed in the construction progress" on the project that necessitated the charge to earnings, which Seaton admitted Fluor had agreed to build for a "fixed price." Seaton says he remains "focused on project execution," which raises the possibility that the company could still make up for lost time on the project, and perhaps see a later benefit to earnings if it succeeds -- or the project could continue to lag, and charges to earnings might mount. 

Now what

As of today, Fluor seems to be betting that the former possibility is slightly more likely than the latter, and that the charge to earnings taken in Q3 accurately reflects all anticipated project delays, while leaving open the possibility of some modest improvements. The company cut the top end of its earnings forecast -- now $2.20 to $2.40 for the year -- by precisely $1.10. The bottom range of that guidance, on the other hand, is only $1.05 below the previous low end of the guided range. So conceivably, Fluor might make back a nickel of the charges taken last night.

Moreover, Fluor expects to get back on the growth path next year, initiating new guidance for fiscal 2017 of $2.75 to $3.25 per share. Working off the midpoints between the two ranges, that implies an expected rebound in growth between 2016 and 2017 in the neighborhood of 30%. With Fluor shares now trading for 15 times expected 2017 earnings, and 30% near-term growth in the offing, there's still a chance this stock might bounce back yet.

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