Companies
With Year-End Results, Fluor Aims Ahead to Grow Data Center and Federal Work
Contractor is moving past some year end and Q4 bumps to maximize rewards ahead from federal, data center and energy links and project delivery capabilities in fast changing markets.
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In its year-end and fourth-quarter results reported on Feb. 18, Fluor Corp. noted gains in company revenue and in certain profit metrics, but project setbacks and other issues made it miss some market analyst benchmarks. Contractor executives remain bullish it will have better outcomes ahead when its Trump-disrupted federal sector work settles and with new prospects for major energy and data center work expansion.
Corporate revenue rose 5.4% in 2024 to $16.3 million, and 11% in quarter four compared to the same periods one year ago, based on what analysts said were “solid contributions” from its energy, infrastructure and advanced manufacturing businesses. But the increases still missed their consensus levels, as did Fluor’s year-end adjusted earnings per share, which dropped 29% from its 78-cent figure in place at the end of 2023. Adjusted net earnings fell 13.5% year-over-year to $530 million from $613 million.
Analysts had hoped for better news on completion of the epic $14-billion LNG Canada export gas terminal in British Columbia, but the firm said work has "surpassed the 95%" finish point and is "on track" to meet the multi-company owner's mid-year gas shipment target. Fluor has had to mobilize more skilled workers to expedite work, it said, and expects to resolve this year still "outstanding issues" related to COVID-19 impacts.
The contractor now targets more "mid-scale" LNG projects, large Middle East petrochemical projects, and work in global carbon capture and decarbonization and nuclear and thermal energy. Fluor disappointed analysts with no new news this quarter related to monetizing its long investment in small nuclear reactor developer NuScale. "We continue to negotiate with our strategic investor to reach an agreement on a long term monetization ... while moving NuScale closer to commercialization. We believe our current path is the best."
Backlog numbers were down for the year, Fluor also reported, but the gross margin dollar value on the total is up 7% year over year, with 80% of it made up of reimbursable work as part of a multi-year company strategy to strengthen its capital structure and improve project execution.
“Operating cash flow was strong for the year at $828 million, and on the positive side, there was no noise from legacy problem projects,” said Jamie Cook, lead construction sector analyst at Truist Securities, noting the firm also said it completed $125 million in stock repurchases in the quarter and expects to buy back $300 million in the coming year.
“This was our best year for operating cash flows since 2015,” said Joe Brennan, Fluor's chief financial officer, who steps down on March 1 after 31 years at the firm, to be succeeded by John Regan, chief accounting officer.
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Bottom Line Hit
The moves came as Fluor reported a $116-million cost impact in the quarter related to a negative jury verdict against a company joint venture in a dispute related to a North Texas Tollway Authority design-build extension project that was completed in 2012, according to the firm's federal filing last year.
Claiming the recent $280-million verdict against Fluor and Balfour Beatty Construction for contract breach “does not accurately reflect the evidence at trial,” the firm said it is “evaluating all options that may eliminate most, if not all, of the provisions taken.”
Delivering the mixed financial news was CEO David Constable, who also said he would leave in May the position he has held since late 2020, to become corporate executive chairman. Succeeding him then will be Chief Operating Officer Jim Breuer.
Constable said the firm is “tracking closely” the Trump administration's orders and announcements, but told analysts “it's still too early to be definitive about the long-term impacts.” He said, however, that the firm sees the directives’ “underlying themes of pro domestic energy, key minerals production and AI infrastructure development … as favorable to nuclear and thermal sources of energy, LNG exports, expedited permitting, increasing domestic mineral production and significant data center buildouts.”
According to Constable, Fluor “has indications that its key contracts with agencies such as the U.S. Defense and Energy Departments and the Federal Emergency Management Agency “will continue because they are mission critical and we feel good about [their] continuity.”
In its energy solutions business, Fluor said revenue increased 6.9% year over year to $1.52 billion in the quarter, with its Q4 margin at 4.1%, significantly up from 1.8% a year ago, although backlog ended the year at $7.6 billion, down from $9.7 billion one year earlier.
Breuer noted “a robust slate of opportunities” in advanced manufacturing and other tech focused work—particularly in the emerging data center boom. He announced a master agreement with an undisclosed “leading technology provider” for “initial data center work” at a co-located site and said Fluor is “in conversations or has agreements with the top four data center developers” that he also did not identify.
“They are talking about several hundred billion dollars worth of announced investments,” said Breuer. “These jobs take a little more time to mature and develop. We’re going to approach the market methodically and with proper project pursuit discipline.”
