Why Did Fluor Stock Nosedive in August?

Shares of diversified construction and engineering company Fluor (FLR +1.28%) plunged 25% after it reported disappointing Q2 earnings numbers and lowered its guidance on Aug. 1.

Fluor's stock had a rocky start to the year. And just when it had finally climbed out of the hole, the Q2 earnings report sent shares reeling.

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NYSE: FLR

Fluor

Today's Change

(1.28%) $0.61

Current Price

$48.23

Key Data Points

Market Cap

$6.9B

Day's Range

$47.35 - $49.07

52wk Range

$33.82 - $57.50

Volume

1K

Avg Vol

2.6M

Gross Margin

-77.40%

Can it get back on track?

A rough second quarter

Analysts were expecting Q2 revenue of around $4.7 billion and per-share earnings of $0.56. Instead, Fluor reported Q2 revenue of just $3.98 billion: a 15% miss, and a year-over-year decline of 5.9%. Adjusted per-share earnings were even worse, at $0.43: a 23% miss, down 49% (yikes!) from the year-ago quarter.

Even beyond the marquee numbers, the quarter was painful. The value of newly awarded contracts in Q2 was just $1.8 billion, down 43%. The company's backlog of projects also shrank 13% over the past year, from $32.3 billion to $28.2 billion.

Perhaps the only highlight of Fluor's Q2 earnings report was from its majority stake in nuclear start-up NuScale Power (SMR 6.01%). When Fluor reported earnings, NuScale's shares had skyrocketed more than 150% year to date. That represented $3.2 billion in pre-tax mark-to-market gains on Fluor's NuScale investment, which was included in its equity-method earnings calculation.

Image source: Getty Images.

An even rougher outlook

Adding insult to injury, Fluor also significantly reduced annual guidance. It had been calling for $575 million to $675 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) and $2.25 to $2.75 in earnings per share (EPS). Now it expects just $475 million to $525 million in EBITDA and $1.95 to $2.15 in EPS. The company cited "client hesitation around economic uncertainty" for the declines.

As bad as things are right now for Fluor, the company's long-term prospects look good, with a $28.2 billion project backlog that's 80% reimbursable, insulating it somewhat from clients who get cold feet. But investors should expect more near-term pain.