February 26, 2010 / 12:53 AM / 10 years ago

WRAPUP 2-Fluor adds to weaker engineering project outlook

* Fluor Q4 EPS 82 cents vs 88 cents expected by Wall St

* Foster Wheeler, KBR top Q4 estimates; 2010 outlook mixed

* Fluor shares drop 6 pct, Foster Wheeler down 2 pct (Adds comments from Fluor conference call, senator on KBR)

By Braden Reddall

SAN FRANCISCO, Feb 25 (Reuters) - Fluor Corp (FLR.N), the largest publicly traded U.S. engineering company, and two rivals gave investors on Thursday few reasons to hope for a dramatic bounce in project investment this year.

Fluor reported a lower quarterly profit and cut its 2010 profit outlook as it anticipated only a gradual recovery in capital spending for its clients, with prospects for contracts looking somewhat healthier in the second half.

Its shares fell 6 percent.

The company cut its 2010 earnings per share range by 40 cents at both ends to $2.80 to $3.20, while its backlog declined further to $26.8 billion at the end of 2009 from $28 billion three months before. [ID:nN25124954]

That followed a slightly better-than-expected profit from Foster Wheeler AG FWLT.O, which said the weak conditions that were weighing it down would persist in 2010. [ID:nN25213814]

“The competitive dynamics for the energy-levered (engineering and construction) players right now are pretty acute. It’s a dog fight for new project awards, even in areas where projects are flowing,” said Jeff Spittel, an analyst with Pritchard Capital Partners in Houston.

Alan Boeckmann, chief executive and chairman of Irving, Texas-based Fluor for the past eight years, explained the downward pressure on pricing by saying: “Everyone is hungrier today than they were over the last cycle.”

“We are concerned about the markets,” he told analysts on a conference call. “But we do see the year unfolding in a manner that will allow us to grow as we go through the year.”

Boeckmann said it was proving tougher than expected to do acquisitions in infrastructure and offshore oil and gas. But he aims to do deals in both sectors this year, and has more time to look over assets after appointing in November a chief operating officer — the role Boeckmann held before his current job.

KBR Inc (KBR.N), another Texas-based engineering and construction company, said on Thursday it saw more activity in 2010, if not necessarily improved pricing. [ID:nN25198093]

But due to weaker U.S. Army contract awards, KBR had to slice 10 cents off the low end of its anticipated 2010 earnings per share, bringing it down to a range of $1.50 to $1.80.

ENERGY FOCUS

All three companies do a lot of work for the energy sector and have seen customers slow development of new projects over the past 18 months because of swings in energy prices and high construction costs.

Foster Wheeler Chief Executive Ray Milchovich, who steps down as CEO in June, did not give full-year guidance, but said the slump would likely have an “unfavorable” effect in 2010.

Fluor’s fourth-quarter net profit fell 22 percent to 82 cents per share, while analysts had been expecting 88 cents, according to Thomson Reuters I/B/E/S. Its shares fell 5.7 percent to $42.50 in after-hours trading.

Foster Wheeler’s net income fell to 51 cents per share from 75 cents a year before. Adjusted for one-time items, it came in just ahead of what analysts expected. The company’s stock shed 0.8 percent to $26.50 in regular trading, and slipped 2 percent after-hours.

KBR also topped estimates with earnings of 45 cents per share, down 17 percent. Its shares rose slightly to $20.34. (Reporting by Braden Reddall; editing by Andre Grenon and Carol Bishopric)

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