Fluor Corporation: Zacks’ Bear of the Day Play

Fluor Corporation (FLR) delivers engineering, procurement, construction, maintenance (EPCM), and project management to governments and clients in diverse industries around the world. The Texas based company operates in five segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services, and Power. Fluor is a primary service provider to the United States Federal Government. It performs operations and maintenance activities for major industrial clients, and also operates and maintains their equipment fleet.

The company has a market cap of $7.2 Billion and has a Forward PE of 15. The stock sports a Zacks Style Scores of “D” in Momentum.  The company has 3-5 year growth rate of 14.00% and dividend yield of 1.63%. However, a recent guidance cut with the combination of earnings revisions heading lower make the stock a Zacks Rank # 5 and today’s Bear of the Day.

Earnings

Fluor reported Q1 earnings on May 5th, seeing EPS at $0.85 verse the $0.86 expected. The company saw a slight beat on revenue, seeing $4.42 Billion verse the $4.41 Billion expected. In addition the company cut fiscal year 2016 guidance range to $3.25-3.65 verse the $3.65 expected. The previous range was $3.50-4.00.

The stock fell 8% on the news and has since grinded back close to pre earnings levels. Investors would be wise to sell shares due to falling earnings estimates for the rest of the year. The danger being that shares could dip back below $50/shares and challenge 2016 lows around $40.

Estimates

Over the last 60 days, the Fluor has seen estimates fall for both fiscal year 2016 and 2017. For the current year we have seen a 7.3% revision lower from $3.65 to $3.38. For next year, estimates have fallen 4.3%, from $3.68 to $3.52.

The upcoming quarters are also seeing revisions lowers, which doesn’t bode well for the company when it reports on August 4th.

A Better option

If investors want exposure to the engineering, research and development space they would be better off with Willdan Group (WLDNSnapshot Report) , a Zacks Rank # 2 (Buy). The Anaheim based company is a leading single resource provider of specialized outsourced services to small and mid-sized public agencies located primarily in California and other western states.The company has a low market cap of $86 million and sports a Zacks Stlye Score of “B” in Value.

Willdan reported an EPS beat on May 5th and estimates for both the current year and next year. The stock is up over 50% from its 2016 lows. The company reports Q2 earnings on August 11th.

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