Fluor 1Q17 Earnings Call Notes

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David Thomas Seaton – Fluor Corp.

Lowered guidance

“Let me get started off by addressing the guidance. First quarter admittedly got us off to a slow start for the year on earnings. That and the potential for slow burn on a couple of key projects put pressure on the lower end of our previous guidance range. The upper end of the range would have required new awards coming in at a faster pace than we’ve recently experienced. For these reasons, we have lowered our guidance for the year.”

We continue to believe a gradual recovery is underway

“While first quarter economic data has been relatively soft, we continue to believe a gradual recovery of our markets is underway, driven by improvements in the global economic activity. Some of the leading indicators for future capital spending like industrial production, capacity utilization are improving in several regions and industries, which provides us confidence that our clients are beginning to increase their spending.”

However the lack of engineering awards is unprecedented

“However, the lack of engineering and new awards is unprecedented and lower than we expected to see when we initially issued guidance for 2017 last November. Let me emphasize that we believe that we have good insight into what is coming and that the opportunities remain robust.”

Projects are being pushed out

“In fact, everything is pushed to the right where when you think about the guidance that we set last year in November, we were expecting some significant awards in the third and fourth quarter of last year that would have been really in the peak of burning their engineering scope now. We still are scheduled to put those projects into backlog in the coming quarters but, as you can see, you missed basically three quarters of earnings on those projects, or at least the ramp up, it pushes everything to the right.”

We’re late cycle and this cycle is no different

“Thank you, and thank you to everyone for participating on our call today. As I said, although we’re disappointed on where we are at this point in 2017, all indications are that this is unprecedented contraction in the capital spending of our customers and that it is coming to a close and optimism is there. Our industry has always been a late cycle industry and this cycle is no different.”