Fluor (FLR) and Foster Wheeler (FWLT) Report

Both infrastructure companies reported before the bell. As I stated yesterday, I cut back my Foster Wheeler (FWLT) position by half ahead of earnings (down to below 2% of the fund), since the stock was acting weakly. And as I stated, nothing is fool proof, I was simply playing the better to be safe than sorry card. Well Foster Wheeler proved that wrong, and is up nearly 8% this morning. As I stated, I'd be happy to add higher once the coast is clear, but of course I would of loved to have gotten that 8% gain on another $20K shares which I had sold yesterday. Such is the drawback from caution; but one must be consistent in methodology or you have nothing in this market. Foster Wheeler looks like a $200 stock waiting to happen. Fluor (FLR) reported solid earnings but is down a bit this morning.

First to Fluor - everything was fine; they were a little light on their revenue number but "blah blah blah short term hand wringing blah blah blah" - backlog = $27.9 BILLION, up 27% year over year. Again this is nearly 2 years worth of work - the story of backlog increases across the sector continues. Government work was a bit light due to tough year over year comparisons but they are finding a ton of work elsewhere. Good enough. 2008 is what I am looking now; analysts were in for $5.28 and the company is guiding $4.90 to $5.30, so everything is on track.
The stock dipped down to its 50 day moving average so I bought a bit more (I was not at the computer early this morning so missed the lows of the day); nothing huge as it's still very expensive but I am trying to get it closer to a 1% position in the fund - I'd prefer to be in McDermott and Foster Wheeler on valuation.

• Engineering and construction company Fluor Corp (FLR) said on Wednesday third-quarter earnings more than tripled, boosted by higher operating profit in its oil and gas segment, but revenue missed Wall Street targets.
• Net income rose to $93.7 million, or $1.02 a share, from $27.3 million, or 31 cents a share, a year earlier. Revenue climbed 22 percent to $4.12 billion. Analysts surveyed by Reuters Estimates had expected, on average, revenue of $4.38 billion.
• Last year, the company benefited from significant project awards from the Federal Emergency Management Agency for hurricane relief and Iraq reconstruction work. Government segment revenue in the third quarter fell 39 percent to $336.6 million from $550.3 million.
• Fluor also narrowed the lower end of its 2007 earnings forecast to $4.10 to $4.20 per share, but that is still short of Wall Street estimates for a profit of $4.24 per share, according to Reuters Estimates.
• Revenue in the oil and gas unit climbed to $2.18 billion from $1.38 billion, while operating profit rose 29 percent to $112 million.
• Consolidated new contracts for the quarter were $6 billion, up from $4.8 billion a year earlier, the Irving, Texas, company said in a filing with regulators.
• Consolidated backlog at the end of the third quarter was $27.9 billion, up 27 percent from a year earlier.

Next, Foster Wheeler earnings

• Engineering and construction services firm Foster Wheeler Ltd. said Wednesday third-quarter earnings rose 70 percent due to strong growth in the company's international operations. Net income rose to $129.1 million, or $1.78 per share, from $75.8 million, or $1.07 per share, during the same period last year.
• Adjusted net income, which excludes items such as gains on asbestos-related insurance receivables, rose to $120.5 million, or $1.66 per share, in the third quarter, from $54.6 million, or 77 cents per share, during the comparable period a year ago. Analysts polled by Thomson Financial, on average, forecast earnings of $1.38 per share for the quarter on revenue of $1.27 billion.
• Foster Wheeler's operating revenue rose to $1.3 billion in the third quarter, from $910.6 million during the third quarter a year ago.
• Milchovich added, “We continue to see an ongoing need for significant investment in the major markets we serve. We saw abundant evidence of this in our third-quarter bookings, which included a very large engineering, procurement, and construction (EPC) contract for a world-class petrochemical facility in Singapore, a front-end engineering design (FEED) contract for another petrochemical complex in Qatar as well as a number of major boiler contracts in our Global Power Group.

I don't see anything on first glance about backlog, but needless to say this company is positioned in all the places I want to be; petrodollars in the middle East and rising economies in the Far East. I'll be adding back to my position on any weakness. They also did not say anything about 2008 guidance but considering the fact they beat by 28 cents this quarter I am sure 08 estimates are 'wrong'. I'll be looking for $7+ earnings in 2008. A 2 for 1 split was also offered, although thats just an accounting issue to me.

Keep in mind McDermott (MDR) reports after the bell; expect more of the same.

Long Fluor and Foster Wheeler in fund; no personal position