Costs Crush Fluor Profits

The engineering concern backs its recently lowered guidance.
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Fluor

(FLR) - Get Report

reported a big drop in third-quarter earnings, as expected, due to cost overruns on several government projects.

The Irving, Texas-based engineering and construction outfit said Monday that its third-quarter profit tumbled to $27.3 million, or 31 cents a share, from $131.2 million, or $1.51 a share, last year.

The latest quarter's results included loss provisions of $168 million related to a number of fixed-price projects in the company's government and infrastructure segments, including a $133 million charge on certain U.S. embassy projects. Fluor shares were hit late last month after the company

warned of lower profits for the year due to the cost overruns.

Analysts polled by Thomson First Call had an average estimate for a loss of 12 cents a share for the quarter.

"While we are disappointed with the charges taken on fixed price projects this quarter, we are committed to completing these projects within the current estimates," said Chief Executive Alan Boeckmann in a statement.

Fluor's revenue declined slightly to $3.36 billion from $3.42 billion last year, when the top line was boosted by a $294 million resolution of claims on a Venezuelan project. Analysts, on average, predicted revenue of $3.57 billion for the recent quarter.

New awards for the third quarter were $4.79 billion, up 89% from $2.53 billion a year ago.

"We are encouraged by significant opportunities in the oil, gas, infrastructure and power markets," Boeckmann said. "The outlook for 2007 reflects our expectation for a broad expansion of new awards and backlog and a commensurate rise in earnings."

Fluor reiterated its recent estimates for 2006 and 2007 earnings. The company sees earnings of $2.40 to $2.60 a share for this year and $3.50 to $3.80 a share for 2007.

Wall Street expects 2006 earnings of $2.52 a share and 2007 earnings of $3.77 a share.