8-K: Fluor Reports Strong 2024 Results Driven by Reimbursable Projects and NuScale Gain

Fluor Corporation announces its fourth quarter and full year 2024 results, highlighting strong operating cash flow, new awards, and a significant gain from the deconsolidation of its NuScale investment.

Summary

• Fluor Corporation reported its financial results for the year ended December 31, 2024.
• Revenue for 2024 was $16.3 billion, and net income attributable to Fluor was $2.1 billion, or $12.30 per diluted share.
• This includes a $1.6 billion gain from the deconsolidation of Fluor's investment in NuScale.
• Consolidated segment profit for the year was $635 million, compared to $537 million in 2023.
• Adjusted EBITDA for 2024 was $530 million, and adjusted diluted earnings per share was $2.32.
• Full year new awards totaled $15.1 billion, with 85% being reimbursable projects.
• The ending backlog for 2024 was $28.5 billion, with 79% being reimbursable.
• Operating cash flow for 2024 was $828 million, the highest since 2015.
• The company repurchased $125 million of shares in Q4 and plans to repurchase $300 million in 2025.
• For 2025, Fluor is establishing an adjusted EBITDA guidance of $575 to $675 million and adjusted EPS of $2.25 to $2.75 per share.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong earnings, cash flow, and backlog, but tempered by project challenges and a legal provision.

Positives

• Strong operating cash flow of $828 million, the highest since 2015.
• Significant gain recognized from the deconsolidation of the NuScale investment, contributing $1.6 billion to net income.
• Increase in cash and marketable securities to $3.0 billion, up 14% from 2023.
• Urban Solutions segment profit improved to $304 million in 2024 compared to $268 million in 2023.
• Mission Solutions profit improved to $153 million in 2024 compared to $116 million a year ago.
• General and administrative expenses decreased to $203 million from $232 million a year ago due to a reduction in performance-based compensation.

Negatives

• Full year new awards decreased to $15.1 billion compared to $19.5 billion a year ago.
• Ending backlog decreased to $28.5 billion compared to $29.4 billion in the prior year.
• Energy Solutions segment profit was impacted by cost growth related to schedule challenges and reduced productivity on a large project in the late stages of execution.
• A $116 million provision was taken related to a jury verdict against a Fluor joint venture on an infrastructure project completed over 12 years ago.

Risks

• The company is evaluating options to eliminate most, if not all, of the $116 million provision related to a jury verdict against a Fluor joint venture.
• Energy Solutions segment profit was impacted by cost growth related to schedule challenges and reduced productivity on a large project.
• The company acknowledges the cyclical nature of its markets and the potential for project delays, cost overruns, and intense competition.
• The company is unable to provide a reconciliation of its adjusted EPS and adjusted EBITDA guidance to the most comparable GAAP measure without unreasonable efforts.

Future Outlook

Fluor is establishing an adjusted EBITDA guidance for 2025 of $575 to $675 million and adjusted EPS of $2.25 to $2.75 per share, assuming a tax rate of 30 to 35%.

Management Comments

• David Constable, chairman and chief executive officer of Fluor, stated that Fluor's efforts have positioned the company to deliver significant value and opportunities for its clients, employees, and shareholders.

Industry Context

Fluor's focus on reimbursable projects aligns with a broader industry trend towards risk mitigation in large-scale construction and engineering projects. The deconsolidation of NuScale reflects the challenges and capital intensity associated with next-generation energy technologies.

Comparison to Industry Standards

• Fluor's backlog composition, with 79% reimbursable projects, is a positive sign compared to competitors like Jacobs Engineering Group and AECOM, who are also focusing on lower-risk, higher-margin projects.
• The adjusted EBITDA margin of approximately 3.25% ($530 million/$16.3 billion) is within the typical range for large EPC companies, but there is room for improvement compared to industry leaders like Bechtel and TechnipFMC.
• The company's operating cash flow generation is a strong point, exceeding that of some peers in the sector.

Legal Proceedings

• A $116 million provision was taken related to a jury verdict against a Fluor joint venture on an infrastructure project completed over 12 years ago.

Stakeholder Impact

• Shareholders will benefit from the strong financial performance and planned share repurchases.
• Employees can expect continued investment in engineering and project execution teams.
• Clients will benefit from Fluor's focus on delivering safe, well-executed, and capital-efficient projects.

Next Steps

• Fluor will host a conference call on February 18, 2025, to discuss the results.
• Fluor will share its view on the markets over the next four years at its upcoming strategy update event on April 2nd.

Key Dates

Keywords

Fluor, financial results, EBITDA, backlog, new awards, NuScale, earnings, revenue, EPS, reimbursable projects