In a big earnings week for infrastructure stocks, Fluor joined Quanta Services and Jacobs Engineering Group in warning of headwinds to the economy, including inflation, Covid-19 and foreign exchange.
While KBR signaled "favorable market tail winds" earlier this week, it missed revenue estimates for the second quarter. All four infrastructure stocks ended the week lower.
Early Friday, Fluor lowered the high end of 2022 EPS guidance, after significantly missing Q2 earnings estimates on currency and other headwinds. FLR stock fell.
Heavy construction stocks tumbled on the week, with several near buy points.
Quanta Services, a highly rated IBD Leaderboard stock, Fluor and KBR benefited from last year's $1 trillion federal infrastructure spending bill.
Last week's $369 billion tax-and-climate package could accelerate investments in oil-and-gas pipelines, as well as renewable energy.
KBR, an old Halliburton spinoff, and its peers provide engineering, contracting and construction services. They target the civil infrastructure market, including governments, utilities and pipeline companies. KBR, Fluor and Jacobs are more involved in oil and gas infrastructure, while Quanta Services is involved in renewable energy projects for utilities.
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Fluor Earnings, FLR Stock
Estimates: Fluor earnings are likely to fall 11% to 29 cents per share. Sales are expected to rebound 5% to $3.391 billion.
Results: Early Friday, Fluor revealed that Q2 earnings tumbled 59% to 13 cents. Revenue rebounded 2% to $3.299 billion.
Results for the quarter were weighed down by legacy infrastructure projects, higher-than-anticipated tax expenses, and currency fluctuations, Fluor said in an earnings release early Friday.
Fluor tightened its full-year EPS guidance from $1.15-$1.40 to $1.15-$1.35.
"The new range reflects a higher effective tax rate due to our current mix of global earnings and includes the impact of foreign currency translations and project charges in the second quarter," the release added.
Outlook: For the full year, Wall Street sees Fluor earnings of $1.23 a share, increasing 31% from 2021.
Shares closed 9.1% lower at 23.08 on the stock market today, undercutting its converged 50-day and 200-day moving averages. Fluor had closed up 0.8% Thursday, almost even with the 50-day average.
Fluor stock ended the week down 9.1% for the week.
Quanta Services Earnings, PWR Stock
Estimates: Analysts project Quanta earnings will jump 44% year over year, to $1.52 per share. Revenue is expected to climb 34% to $4.026 billion.
Results: Early Thursday, Quanta Services posted earnings of $1.54 a share on revenue of $4.232 billion.
Outlook: Quanta affirmed full-year financial expectations and guided EPS of $6.10-$6.44. The midpoint of $6.27 is lower than Wall Street's expectations for $6.31, which would be up 28% from 2021.
The Covid-19 pandemic, inflationary pressures and related challenges "have significantly impacted" Quanta's operations and markets "and we continue to consider future uncertainty," Quanta Services said in a post-earnings outlook summary Thursday.
PWR stock rallied 2.6% Friday. It ended down 1.4% for the week, back below a 138.56 buy point but holding firm support at its 21-day exponential moving average. Shares fell 2.7% Thursday following earnings.
Leaderboard stock PWR leads IBD's heavy construction group. It earns the No. 1 Composite Rating and No. 1 RS Rating out of 21 stocks. Its RS Rating of 96 means that it has outperformed 96% of all stocks in IBD's database over the past year.
IBD featured PWR stock as Stock of the Day in early July, ahead of its breakout past 138.56.
KBR Earnings, KBR Stock
Estimates: Analysts polled by FactSet expected KBR earnings to rise 12% to 65 cents per share. Revenue was seen increasing 6% to $1.629 billion. KBR laps tough comps from a year ago.
Results: KBR earnings rose 31% to 76 cents a share, snapping a three-quarter string of EPS growth declines. Revenue rose 5.2% to $1.62 billion, the second quarter of decelerating top-line gains.
Outlook: KBR reaffirmed its full-year EPS target of $2.53-$2.65. Wall Street expects KBR earnings to grow 8% a share to $2.61, FactSet shows, but that was before the company's 11-cent beat in Q2.
"Our 2022 financial guidance is underpinned by favorable market tail winds, good bookings momentum, a strong first half, and work under contract of over 90% to deliver our 2022 results," the company said in an earnings release.
Still, some tough quarters lie ahead. Wall Street expects KBR's revenue to fall double digits in the current quarter and Q4. Its EPS boomed 40% in 2021.
Shares rose 0.5% Friday. That left the stock down 4.3% for the week, well below a 52.25 buy point but holding above cs21-day support.
KBR stock topped a 52.25 buy point from a double-bottom base last Thursday.
KBR stock has outperformed as the stock market recovers from its June slide. It sits comfortably above a rising 50-day moving average, backed by a rising relative strength line. The buy range goes to 54.86.
In April, IBD highlighted KBR stock as Stock of the Day as it formed a flat base.
Jacobs Earnings, J Stock
Early Monday, Jacobs Engineering announced that Q3 earnings rose 13% to $1.86 a share. Revenue climbed 7% to $3.827 billion. Both beat views. But lackluster guidance sent J stock below an early trendline entry as well as a double-bottom buy point.
The midpoint of the company's updated Q4 EPS guidance came in at $1.80, well below Wall Street's views for $1.93. Foreign exchange shifts cut the EPS outlook by 20 cents, Jacobs said in a release.
J stock lost 1% Friday. Shares have slid 6.6% for the week so far, undercutting the 10-week and 40-week lines. It tumbled 5.7% Monday following earnings.
Puts, Takes For Infrastructure Stocks
On July 29, the Wall Street Journal reported that a plan to streamline permitting for energy infrastructure projects is emerging as a linchpin of the Schumer-Manchin surprise $369 billion tax-and-climate deal unveiled last week — one that could expedite wind and solar power development as well as pipelines for oil and gas.
Investors are braced for possible recession in the U.S. and global economies, while companies and consumers cut back spending amid the rapid rise in interest rates to cool inflation.
In mid July, Fastenal, a construction supply specialist, warned of softening demand after it hiked prices to manage cost inflation.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
