For Fluor, I really like what I read, but when a stock of this size, in this relatively quiet sector, is up 12% on a "gap up", I am going to take the profits and run and rebuy lower in the future. I sold 40 of my 50 shares (80%) of Fluor here in the $187 range. Certainly, as always, it could go higher but we made a nice profit here with most purchases in the $120s-$140s- this reduces my stake to 0.2% of the fund.
McDermott had some shaky results but again these are long term business cycles with very lumpy quarters, so I am not too worried - however I am taking profits here as well with the stock up nearly 5%, in the $56s - it had fallen to $52 yesterday. I am selling 100 of the 250 shares I have (this was once my top position) in the mid $56s. This reduces my stake to 0.7% of the fund.
Fluor Results
- Strong demand from oil and gas companies lifted earnings at infrastructure giant Fluor (NYSE:FLR - News) by 60% from last year, smashing Wall Street forecasts.
- Fluor earned $1.50 a share in the first quarter, the company said after Monday's market close. Analysts expected just $1.27.
- "We underestimated the strength of the oil and gas end markets," said analyst Andy Kaplowitz of Lehman Bros.
- What's more, the firm raised its full-year EPS outlook to $6.25 to $6.55 -- 21% higher at the mid-point of its $5.10 to $5.50 forecast on Feb. 28.
- Revenue in the quarter grew 32% to $4.8 billion, also above forecasts.
- Fluor won $5.7 billion in new project awards. That was down slightly from the fourth quarter but 28% higher than a year earlier. Though Irving, Texas-based Fluor is one of the more diversified engineering and construction firms in the world, oil and gas projects made up the lion's share of new-project awards, some $4.3 billion.
- The rest came from industrial, power, global services and government contracts. Total backlog at the end of the quarter stood at a record $31.5 billion.
- McDermott International (NYSE:MDR - News), another energy-related infrastructure firm that reported late Monday, didn't fare as well. Its first-quarter earnings fell 22% to 54 cents, meeting views. Revenue rose 6% to $1.45 billion, just missing forecasts.
- The firm had said that bad weather in Asia-Pacific and the Mideast would affect offshore work. (lame excuse)
- McDermott focuses mostly in the offshore oil and gas markets. Fluor mostly works onshore.
- "A lot of Fluor's customers have raised forecasts for capital expenditures over the next several years," said Kaplowitz, citing Exxon Mobil (NYSE:XOM - News) as one. Fluor's client roster features major and national oil companies, including Chevron (NYSE:CVX - News), Marathon Oil, ConocoPhillips (NYSE:COP - News), Irving Oil and the Kuwait National Petroleum Co.
- Though more than half of Fluor's revenue stems from the U.S., one exec said during yesterday's conference call that it has seen "very little effect from tightening credit and recessionary pressures."
- Kaplowitz says customers aren't looking at a slower U.S. economy this year but are making projections on what they think will happen three to five years from now.
- In the U.S., a lot of growth will continue to come from oil refinery expansion and upgrades, especially to handle more high-sulfur heavy crude, which is cheaper and more plentiful than sweet crude.
- Growth in the Mideast and China tends toward brand-new refineries and chemical plants.
- Alternative-energy projects are a small portion of overall sales, but they are expected to grow in tandem with rising demand for renewable energy sources.
