What happened

Shares of Fluor (FLR 4.85%) dropped more than 25% on Tuesday morning after the engineering contractor disclosed a Securities and Exchange Commission investigation into its past accounting and financial reporting. Fluor delayed release of full-year financial statements because of the probe but did provide initial 2020 guidance within range of analyst expectations.

So what

Before markets opened on Tuesday, Fluor said the SEC is conducting an investigation and has requested documents and information related to projects for which the company recorded charges during the second quarter of 2019. Fluor said it is conducting an internal reviews as well, and said it "has not made a determination at this time" about whether there are errors in its statements.

An investor despondent over a falling stock chart.

Image source: Getty Images.

Given the ongoing review, Fluor said it does not expect to file its form 10-K annual report in February as expected.

The company did provide some preliminary 2019 data, saying that it ended the year with a backlog of $32.7 billion. It said it won $12.6 billion in new awards in 2019, including $3.7 billion from the energy sector and $2.6 billion from infrastructure and power customers. Fluor said it expects to earn between $1.40 and $1.60 per share in 2020, compared to a $1.51-per-share analyst consensus.

Fluor also said it was calling off the planned sale of its government business. The company said that it's growing confident that its internal restructuring plan will allow it to generate enough cash flow to avoid selling part of the business to raise cash.

Now what

The market hates uncertainty, and Fluor's announcement delivered more questions than answers. Shares of Fluor have now lost more than 70% of their value over the past three years, first due to execution issues, and more recently due to fears of a global slowdown. The SEC probe just adds to the uncertainty and has sparked the latest sell-off.

There is value in Fluor's business, and the company sounds optimistic about how its internal turnaround is progressing. But until more is known about the extent of the SEC probe and what the government finds, it's hard to get excited about buying in.