Engineering and construction firm Fluor Corp. (FLR) said Monday its third quarter profit declined 11% over last year, hurt by weak performance at its Oil & Gas segment, and the Global Services segment. Looking ahead, the company lowered its earnings outlook for fiscal year 2009. Following the news, shares of Fluor lost more than 6% in after-hours trading.
For the third quarter, net earnings attributable to Fluor were $162 million, down 11% from $182 million in the prior year quarter. Earnings per share dropped to $0.89 from $1.00 in the previous year quarter. On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.90 per share for the third quarter. Analysts' estimates typically exclude special items.
The Irving, Texas-based company's segment profit for the quarter fell 8% to $300 million from $324 million a year ago.
While three of the five business segments reported double-digit earnings growth over 2008, the Oil & Gas segment profit declined by 8% and the Global Services segment profit plunged over last year, due to a $45 million provision related to a collection issue on a completed paper mill revamp project in Louisiana.
Segment margins were 5.5% for the third quarter, compared to 5.7% in the year-ago quarter.
Third quarter revenue declined 4% to $5.4 billion from $5.7 billion in the same quarter of 2008, due to decreases in the Oil & Gas and Power segments. Sixteen analysts had a consensus revenue estimate of $5.49 billion for the third quarter.
Oil & Gas segment's revenue decreased 11% to $2.9 billion, due to declining new award and backlog levels in recent quarters.
Revenue from Industrial & Infrastructure segment increased 26% to $1.1 billion, helped by increases in both the infrastructure and mining and metals business lines.
Revenue for the Government segment soared 47% to $544 million for the third quarter of 2009, attributable to contributions from the Savannah River project and LOGCAP IV task orders in Afghanistan.
The Global Services segment reported revenue of $529 million, down 11% over a year earlier.
Fluor's Power segment generated revenue of $317 million, a 40% drop from the third quarter of 2008, as a large coal-fired project in Texas progressed closer to completion.
New project awards for the third quarter plunged to $2.9 billion from $8.8 billion a year ago.
Consolidated backlog at the end of the third quarter was $28.0 billion, down 23% over the prior year quarter.
Total costs and expenses for the quarter eased to $5.2 billion from $5.4 billion a year earlier.
In a separate development, Fluor said its board has elected David Seaton to the newly created position of chief operating officer.
The company indicated the move as a key element of its ongoing strategy to position and utilize key executives where they can most effectively enhance client engagement, and continue to focus on operational excellence.
All five of the company's operating business groups will report to Seaton along with Project Operations, a unit formed earlier this year to bring greater efficiency and support to the company's projects.
Seaton most recently served as senior group president with responsibility for the company's Energy & Chemicals, Power, and Government groups as well as for Fluor's activities in China and the Middle East.
During the third quarter, the company successfully resolved a dispute on the London Connect project relating to claims against the client for delays and additional costs. The settlement allows for the final close-out of all outstanding issues
For the nine-month period of 2009, net earnings attributable to Fluor were $536 million or $2.93 per share, compared to $527 million or $2.86 per share in the previous year period.
Revenue for the period increased to $16.5 billion from $16.3 billion in the prior year period.
Looking ahead, Fluor lowered its earnings outlook for fiscal year 2009, due to the collection issue on the paper mill project, along with the impact of recent cancellations, scope reductions and delays.
For fiscal 2009, the company now expects earnings of $3.75 to $3.90 per share, down from its previous expectation of $3.80 to $4.10 per share. The Street currently estimates earnings of $3.85 per share for the year.
For fiscal 2010, Fluor anticipates earnings in the range of $3.20 to $3.60 per share. Analysts currently project the company to report earnings of $3.58 per share for 2010.
Fluor closed Monday's regular trading session at $48.01, up $2.61 or 5.75%, on a volume of 3.97 million shares. However, in the after-hours, the shares lost $2.76 or 5.75%.
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