IRVINE — Fluor Corp. on Thursday announced a 12% increase in its quarterly earnings--a boost that, at first glance, indicates the company is unaffected by the recession.
The engineering and construction giant reported profits of $28.8 million, equal to 35 cents per share, for its first quarter ended Jan. 31--compared to $25.8 million, or 32 cents per share, for the same period a year ago.
But stockholders had expected an even stronger showing. "The consensus estimates were in the 40-cents-per-share range," said Thomas O. Lloyd-Butler, an analyst with Montgomery Securities in San Francisco.
Consequently, Fluor's stock closed Thursday at $42.125, down 75 cents, in New York Stock Exchange trading.
Revenue dipped to $1.6 billion, down from $1.8 billion the year before.
"We're making more money on less revenue," said Fluor spokeswoman Deborah Land. "Rather than just quantity, we go for projects that offer a higher margin of profit."
Lloyd-Butler, on the other hand, called Fluor's revenue "lackluster." And while the company's backlog--signed contracts yet to be completed--grew 19% to $11.5 billion, Lloyd-Butler considered it "relatively flat."
Still, he said, "in view of the weak economic environment, Fluor had a decent quarter."
Fluor has benefited from a strategy implemented in the mid-1980s to diversify its business line and expand into foreign markets.
"They have done a good job of diversifying, which allows them to be selective in choosing the products they would like to bid on," said Carey Callaghan, an analyst with New York brokerage Shearson Lehman Bros.
The Irvine-based company reported new engineering and construction awards totaling $1.9 billion during its first quarter, 5% above last year's $1.8 billion in contracts. Counted among the larger contracts it landed in the quarter was a $240-million maintenance project for the Tennessee Valley Authority.
On Wednesday, Fluor announced that it has been awarded a $400-million contract to expand an oil refinery in the Philippines for a subsidiary of the Netherlands-based Royal Dutch/Shell Group. But that contract will not be reflected until Fluor's second quarter.
Land said that about 30% of the company's contracts are with international clients--a cushion that has allowed the company to dodge some of the economic havoc of the U.S. recession.
"Fluor has been quite good at finding pockets of opportunity despite the recession," Callaghan noted.
Much of Fluor's profits are owed to its core engineering and construction business, Fluor Daniel, which posted quarterly earnings of about $40 million--a 20% gain from the previous year.
But its Achilles' heel--the Doe Run Co., a St. Louis-based refiner and producer of lead products--continued to drag down Fluor earnings. The subsidiary lost about $5 million during the quarter--a bigger deficit than it raked up in the entire fiscal 1991 year, when it lost $3.7 million. Doe Run has suffered from weak prices in mineral markets.