What happened
Shares of Fluor (FLR 1.60%) were down as much as 10.6% by 10:30 a.m. EDT on Friday. Weighing on the engineering company was an update on the status of its financial review, strategy, and outlook for 2020.
So what
After completing an internal review, Fluor restated its previously issued financial results for 2016, 2017, 2018, and 2019. It made the restatement after determining that there were "material project-related errors resulting from the absence of timely recognition of changes in forecasted project costs, and from other errors in estimating the amount of variable consideration to be included in revenue for the Radford [Army Ammunition Plant] project." Overall, the company's adjustments reduced its cumulative pre-tax earnings through September of last year by $3.8 million.
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Fluor also provided investors with a strategic update. As part of last year's review, the company's board initiated a broad and comprehensive analysis of its business model to "address today's market and to ensure future success." As part of its new strategy, Fluor's energy and chemicals segment will only pursue reimbursable or open-book lump-sum conversion engineering, procurement, and construction prospects in the future.
Lastly, the company noted that its end markets had experienced a significant shift this year due to commodity price volatility and the economic disruption caused by the coronavirus. Because of that, it's suspending its 2020 guidance. But it did have $2.1 billion in cash at the end of August, which is about where it expects to end the year. That fact, along with its undrawn credit facilities, means that it has enough liquidity to meet its operational and project needs.
Now what
Fluor's accounting issues have weighed significantly on its stock this year. While those seem to be in the rearview mirror following today's restatement, the company is still facing severe headwinds due to the impact of COVID-19 on the energy sector. Therefore, its battered stock will likely remain under pressure until those headwinds begin to fade, and it proves its new strategy can deliver results.
