Fluor Corporation (FLR) Bundle
Understanding Fluor Corporation (FLR) Revenue Streams
Understanding Fluor Corporation’s Revenue Streams
Fluor Corporation's revenue for the third quarter of 2024 reached $4,094 million, compared to $3,963 million in the same period of 2023, marking a year-over-year increase of 3.3%. For the year-to-date (YTD) period, revenue was $12,055 million in 2024, up from $11,654 million in 2023, representing a growth rate of 3.5%.
Revenue Breakdown by Segment
The revenue contributions from different segments for the third quarter and year-to-date periods of 2024 and 2023 are as follows:
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | YTD 2024 Revenue (in millions) | YTD 2023 Revenue (in millions) |
|---|---|---|---|---|
| Energy Solutions | $1,428 | $1,553 | $4,456 | $4,886 |
| Urban Solutions | $1,931 | $1,431 | $5,240 | $3,842 |
| Mission Solutions | $635 | $655 | $1,940 | $2,009 |
| Other | $100 | $324 | $419 | $917 |
| Total Revenue | $4,094 | $3,963 | $12,055 | $11,654 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for each segment are as follows:
- Energy Solutions: Decreased by 8.1% YTD.
- Urban Solutions: Increased by 36.4% YTD.
- Mission Solutions: Decreased by 3.4% YTD.
- Other: Decreased by 54.5% YTD.
Significant Changes in Revenue Streams
In 2024, the Urban Solutions segment experienced a significant increase in revenue, primarily driven by the ramp-up of execution activities on several recently awarded projects, including two life sciences projects and a large metals project. Conversely, the Energy Solutions segment saw a revenue decline due to decreased execution activity on projects nearing completion and a reduction in inflation-adjusted variable consideration recognized in prior periods.
Overall, the total backlog as of September 30, 2024, was $31,319 million, compared to $29,441 million at the end of 2023, indicating a healthy pipeline for future revenue generation.
Revenue by geographic area for the third quarter of 2024 is as follows:
| Region | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) |
|---|---|---|
| North America | $2,877 | $2,609 |
| Asia Pacific | $475 | $442 |
| Europe | $590 | $640 |
| Central and South America | $113 | $201 |
| Middle East and Africa | $39 | $71 |
| Total Revenue | $4,094 | $3,963 |
Overall, Fluor Corporation's revenue performance in 2024 reflects a mix of growth in certain segments while facing challenges in others, illustrating the dynamic nature of its operations across various sectors and regions.
A Deep Dive into Fluor Corporation (FLR) Profitability
Profitability Metrics
In assessing the financial health of the company, profitability metrics such as gross profit, operating profit, and net profit margins are crucial indicators. Below is a detailed analysis of these profitability metrics for 2024.
Gross Profit Margin
For the third quarter of 2024, the company reported a gross profit of $88 million on total revenue of $4,094 million, resulting in a gross profit margin of approximately 2.2%. This reflects a decline from a gross profit of $251 million and a margin of 6.3% in the same quarter of 2023.
Operating Profit Margin
The operating profit for the third quarter of 2024 was $49 million, yielding an operating profit margin of 1.2%. This is a notable decrease from the $218 million operating profit and 5.5% margin reported in Q3 2023.
Net Profit Margin
Net earnings attributable to the company for the third quarter of 2024 were $54 million, leading to a net profit margin of 1.3%. In contrast, the net profit for the same quarter in 2023 was $206 million, equating to a net profit margin of 5.2%.
Trends in Profitability Over Time
Comparatively, the profitability metrics have shown a downward trend from 2023 to 2024:
- Gross Profit Margin: 2024 - 2.2%, 2023 - 6.3%
- Operating Profit Margin: 2024 - 1.2%, 2023 - 5.5%
- Net Profit Margin: 2024 - 1.3%, 2023 - 5.2%
Comparison with Industry Averages
When comparing these profitability ratios with industry averages, the company’s gross profit margin is significantly below the industry average of 10%, operating profit margin is below the average of 4%, and net profit margin lags behind the average of 3%.
Operational Efficiency Analysis
Operational efficiency can be assessed through cost management and gross margin trends. The decline in gross profit indicates increased costs of revenue, which rose to $4,006 million in Q3 2024 from $3,712 million in Q3 2023. This indicates a rising cost structure that is not being offset by revenue growth.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Gross Profit | $88 million | $251 million |
| Operating Profit | $49 million | $218 million |
| Net Earnings | $54 million | $206 million |
| Revenue | $4,094 million | $3,963 million |
| Cost of Revenue | $4,006 million | $3,712 million |
The operational challenges reflected in the profitability metrics highlight the need for strategic initiatives to enhance cost management and improve margin performance moving forward.
Debt vs. Equity: How Fluor Corporation (FLR) Finances Its Growth
Debt vs. Equity: How Fluor Corporation Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total debt of the company was $1.116 billion, compared to $1.158 billion as of December 31, 2023. This total includes:
- 2028 Notes: $556 million
- 2029 Notes: $575 million
- Unamortized discount and deferred financing costs: ($15 million)
The company had no borrowings under its credit facility, which has a capacity of $1.8 billion and matures in February 2026. Letters of credit totaling $483 million were outstanding under this facility.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, was approximately 0.49, calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Shareholders' Equity = $1.116 billion / $2.251 billion
This ratio is below the industry average of approximately 0.60, indicating a relatively conservative leverage position.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In August 2023, the company issued $575 million of 2029 Notes, receiving net proceeds of $560 million. Additionally, the company completed a tender offer to repurchase $115 million of outstanding 2024 Notes.
The company’s credit ratings are as follows:
- S&P: BB+
- Moody's: Baa3
How the Company Balances Between Debt Financing and Equity Funding
As of September 30, 2024, total shareholders' equity stood at $2.251 billion, showcasing a strong equity base that supports the company's growth initiatives. The balance sheet reflects a total of $1.286 billion in additional paid-in capital and $1.261 billion in retained earnings.
| Type of Debt | Amount (in millions) | Maturity Date |
|---|---|---|
| 2028 Notes | 556 | 2028 |
| 2029 Notes | 575 | 2029 |
| Total Debt | 1,116 | |
| Credit Facility | 1,800 | 2026 |
Overall, the company's strategic mix of debt and equity financing illustrates a balanced approach to funding growth while maintaining financial stability.
Assessing Fluor Corporation (FLR) Liquidity
Assessing Fluor Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 1.77 (current assets of $5.265 billion divided by current liabilities of $2.982 billion).
Quick Ratio: The quick ratio, which excludes inventories from current assets, is approximately 1.59 based on cash equivalents and receivables, indicating a solid liquidity position.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at $2.283 billion as of September 30, 2024, compared to $1.900 billion at December 31, 2023. This represents a positive trend in working capital management.
Cash Flow Statements Overview
| Cash Flow Type | 2024 YTD (in millions) | 2023 YTD (in millions) |
|---|---|---|
| Operating Cash Flow | $501 | $(96) |
| Investing Cash Flow | $(129) | $(46) |
| Financing Cash Flow | $22 | $131 |
The significant improvement in operating cash flow during 2024 is attributed to a reduction in working capital requirements and increased customer payments, totaling $501 million compared to a negative cash flow of $(96 million) in 2023. The cash flow from investing activities shows a net outflow of $(129 million) due to capital expenditures and investments in partnerships.
Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents combined with marketable securities were $3.0 billion, compared to $2.6 billion as of December 31, 2023. This increase reflects improved liquidity and the company's ability to fund operations effectively.
Non-U.S. cash and cash equivalents amounted to $1.4 billion as of September 30, 2024, indicating a robust international liquidity position. Additionally, client advances totaled $64 million, which supports project execution and cash flow stability.
However, the company has outstanding letters of credit totaling $483 million under its credit facility, indicating potential liquidity constraints if these obligations need to be met quickly.
Is Fluor Corporation (FLR) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation metrics: Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio reflects the company’s current share price relative to its earnings per share (EPS). As of September 30, 2024, the following data is relevant:
- Share Price: $47.17
- Basic EPS: $0.32
- P/E Ratio: 147.34 (calculated as $47.17 / $0.32)
Price-to-Book (P/B) Ratio
The P/B ratio compares the company’s market value to its book value:
- Market Capitalization (as of September 30, 2024): $3.8 billion
- Total Equity: $2.251 billion
- P/B Ratio: 1.69 (calculated as $3.8 billion / $2.251 billion)
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the company's valuation relative to its earnings before interest, taxes, depreciation, and amortization:
- Enterprise Value: $4.2 billion
- EBITDA (Last 12 Months): $330 million
- EV/EBITDA Ratio: 12.73 (calculated as $4.2 billion / $330 million)
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
| Date | Stock Price |
|---|---|
| September 2023 | $45.00 |
| December 2023 | $46.00 |
| March 2024 | $44.50 |
| June 2024 | $50.00 |
| September 2024 | $47.17 |
Dividend Yield and Payout Ratios
As of the latest financial report:
- Annual Dividend: $0.00 (no dividends paid in 2024)
- Dividend Yield: 0%
- Payout Ratio: 0%
Analyst Consensus on Stock Valuation
According to the latest analyst ratings:
- Buy: 5
- Hold: 10
- Sell: 2
The consensus rating is currently a Hold.
Key Risks Facing Fluor Corporation (FLR)
Key Risks Facing Fluor Corporation
Fluor Corporation faces various internal and external risks that could significantly impact its financial health. Below, we outline the key risk factors that investors should consider:
Industry Competition
The construction and engineering industry is highly competitive, with numerous global players vying for market share. As of September 30, 2024, the company's backlog stood at $31.3 billion, with 56% of this backlog related to projects outside the U.S.. This competitive landscape can lead to pricing pressures, potentially affecting profit margins.
Regulatory Changes
Changes in regulations, particularly regarding environmental standards and labor laws, pose a risk to operational costs and project timelines. The company is also subject to the Global Anti-Base Erosion Model Rules, which establish a global minimum tax rate of 15% for large multinationals, effective starting January 2024.
Market Conditions
Fluctuations in market conditions, including economic downturns or shifts in demand for construction services, can adversely affect revenue. For the 2024 year-to-date, revenue increased to $12.1 billion, a rise from $11.7 billion in 2023. However, the company continues to navigate challenges in specific segments, such as Energy Solutions, where segment profit decreased due to lower execution activity.
Operational Risks
Operational risks include project execution delays, cost overruns, and issues related to subcontractor performance. A notable incident involved a $57 million charge due to cost growth on a construction-only subcontract in Mexico for the year-to-date. Additionally, the company reported a $30 million charge related to schedule delays on a weapons facility project.
Financial Risks
Financial risks encompass interest rate fluctuations, currency exchange rate volatility, and liquidity challenges. The effective tax rate for the 2024 quarter was reported at 70.9%, significantly higher than the 30.4% recorded in the previous year. This increase can affect net earnings, which were $54 million for the quarter, down from $206 million in the same quarter of 2023.
Strategic Risks
Strategic risks arise from decisions related to mergers and acquisitions, divestitures, and partnerships. The company divested its AMECO South America business in March 2023, resulting in a $60 million negative earnings impact. Furthermore, the planned deconsolidation of NuScale is anticipated to recognize a gain of $1.6 billion in Q4 2024, contingent on prevailing stock prices.
Mitigation Strategies
To mitigate these risks, the company has implemented various strategies, including diversifying its project portfolio and maintaining a strong liquidity position. As of September 30, 2024, cash and cash equivalents combined with marketable securities totaled $3.0 billion, up from $2.6 billion at the end of 2023. This financial cushion allows for better navigation of unforeseen challenges.
| Risk Factor | Details |
|---|---|
| Industry Competition | Backlog of $31.3 billion; competitive pricing pressures |
| Regulatory Changes | Global minimum tax rate of 15% effective January 2024 |
| Market Conditions | Revenue increased to $12.1 billion in 2024 YTD |
| Operational Risks | $57 million charge for subcontractor cost growth |
| Financial Risks | Effective tax rate of 70.9% for 2024 Quarter |
| Strategic Risks | $60 million negative impact from AMECO divestiture |
| Mitigation Strategies | Cash and cash equivalents of $3.0 billion as of September 30, 2024 |
Future Growth Prospects for Fluor Corporation (FLR)
Future Growth Prospects for Fluor Corporation
Analysis of Key Growth Drivers
Fluor Corporation is well-positioned to capitalize on various growth opportunities through product innovations, market expansions, and strategic acquisitions. The company reported a total revenue of $12.055 billion for the year-to-date period ending September 30, 2024, compared to $11.654 billion for the same period in 2023, reflecting a growth trajectory driven by increased execution activities in recent projects.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth is projected to continue, primarily fueled by the Urban Solutions segment, which saw a revenue increase to $5.240 billion YTD 2024 from $3.842 billion in 2023. The Energy Solutions segment, although facing challenges, remains a critical component with a reported revenue of $4.456 billion for YTD 2024, down from $4.886 billion in 2023.
Strategic Initiatives or Partnerships
Strategic partnerships are pivotal for future growth. Notably, the backlog as of September 30, 2024, stands at $31.319 billion, up from $29.441 billion at the end of 2023, indicating a robust pipeline of projects. This backlog includes significant contracts such as a large life sciences project which contributed to the increase.
Competitive Advantages
Fluor's competitive advantages stem from its diversified service offerings and strong market presence. The company has a backlog of $19.006 billion in Urban Solutions, which represents a significant portion of its future revenue potential. The company’s ability to execute complex projects efficiently positions it favorably against competitors in the EPC (Engineering, Procurement, and Construction) sector.
| Segment | Revenue YTD 2024 | Revenue YTD 2023 | Change (%) | Backlog (Sept 2024) | Backlog (Dec 2023) |
|---|---|---|---|---|---|
| Energy Solutions | $4.456 billion | $4.886 billion | -8.7% | $8.824 billion | $9.722 billion |
| Urban Solutions | $5.240 billion | $3.842 billion | 36.4% | $19.006 billion | $14.848 billion |
| Mission Solutions | $1.940 billion | $2.009 billion | -3.4% | $3.095 billion | $3.945 billion |
| Other | $419 million | $917 million | -54.4% | $394 million | $926 million |
| Total | $12.055 billion | $11.654 billion | 3.5% | $31.319 billion | $29.441 billion |
As of September 30, 2024, the company reported net earnings attributable to Fluor of $282 million, with diluted earnings per share of $1.63, up from $0.72 in 2023. This financial performance underscores the effectiveness of its strategic initiatives and operational efficiencies.
The company also reported operating cash flow of $501 million for the 2024 year-to-date period, a significant improvement from a negative cash flow of ($96 million) in the previous year, indicating enhanced liquidity and operational performance.
With a total asset value of $7.100 billion as of September 30, 2024, compared to $6.973 billion at the end of 2023, Fluor Corporation demonstrates a solid foundation for future growth and investment opportunities.
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Updated on 16 Nov 2024
Resources:
- Fluor Corporation (FLR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Fluor Corporation (FLR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Fluor Corporation (FLR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.