Fluor Corporation (FLR) Earnings

Management highlights

- **New Awards & Backlog Growth** * Total Q2 new awards exceeded $6 billion, bringing ending backlog to nearly $27 billion. This result is better than expected, as many awards that management anticipated in the second half of 2026 were accelerated by clients. * The book-to-bill ratio is expected to finish the full year well above 1, with strong visibility for additional awards in the third and fourth quarters. * The pipeline of front-end opportunities is being consistently replenished after projects convert to full EPC awards, with new opportunities across fertilizers, data centers, copper, domestic refining, nuclear power, chemicals, and LNG globally. - **Segment Specific Operational Progress** * *Urban Solutions/Infrastructure*: Four major legacy infrastructure projects were completed in Q2, including the Gordie Howe International Bridge (which opened to traffic July 27), LBJ project, Oak Hill Parkway, and the Red Purple Line elevated rail. The Gordie Howe project was impacted by foreign exchange fluctuation, a subcontractor bankruptcy, and client scope changes, with remaining commercial matters still being resolved. The segment holds the majority of current revenue and is expected to drive growth in coming quarters. The mining and metals sub-segment has a $30 billion in-house pipeline of potential awards over the next 18 months, driven by rising client capital spending plans. * *Energy Solutions*: The segment has completed most prior megaprojects and is now executing front-end work that will convert to future EPC awards. Growing demand for electricity from data centers and industrial expansion is driving new opportunities in gas-fired power, with multiple projects in the pipeline that are expected to add to backlog in H1 2027. Fluor signed a new long-term framework agreement with Aramco, and sold its equity stake in its Mexican oil and gas joint venture for $175 million in July 2026, a move that simplifies the portfolio, strengthens liquidity, and refocuses the firm on core growth priorities. In the Middle East, ongoing backlog work has not faced significant disruption despite regional tensions. * *Mission Solutions & Nuclear Expansion*: The segment continues to support U.S. government clients, with all ongoing intelligence contracts extended in 2026. The Centris Fuel Enrichment Facility award was booked in Q2, expanding Fluor's footprint across the full nuclear value chain. Fluor has deep experience across all parts of nuclear, from conventional power plant construction to SMR development, nuclear fuel enrichment, national security site management, and decommissioning, positioning the firm to capture growing global investment in nuclear infrastructure. - **Capital & Liquidity** * Q2 end cash and cash equivalents totaled $3 billion, rising to $3.2 billion by the end of July 2026, providing robust liquidity for share repurchases and inorganic growth opportunities. Reported Q2 operating cash flow was negative $317 million, which included a $357 million one-time tax payment tied to a 2025 share conversion; normalized operating cash flow excluding this item was positive $40 million.

Guidance

- Adjusted EBITDA guidance for full year 2026 was revised upward to a range of $500 to $525 million, compared to prior guidance. The revision accounts for the $23 million in forgone second half profit from the divested Mexican JV, improved performance across the core portfolio, and completion of most legacy loss project headwinds, with no direct impact from Middle East tensions. - Adjusted EPS guidance for 2026 is $2.70 to $2.80 at the current share repurchase pace. - Adjusted operating cash flow guidance (excluding one-time tax payments for the NuScale conversion and Mexican JV sale) is $300 to $320 million. - G&A guidance is $170 to $180 million for the full year, which excludes up to $15 million for potential ERP replacement and technology enhancements. - The expected effective tax rate is 28% to 30%, including the tax impact of the Mexican JV sale. - The full year revenue segment split is unchanged at 65% Urban, 20% Energy, 15% Mission, matching prior guidance from May 2026. - Capital allocation guidance: Fluor maintains its target of $1.4 billion in share repurchases for full year 2026, and will continue to evaluate disciplined inorganic acquisition opportunities aligned with core strategic growth priorities.

Segment performance

Total company Q2 2026 revenue was $4.3 billion, up 9% year-over-year. Adjusted EBITDA was $149 million (up from $96 million YoY), and adjusted EPS was $0.91 (up from $0.43 YoY). Ending backlog was $26.9 billion, after pre-emptively removing $650 million of backlog from the divested Mexican joint venture. Legacy remaining project backlog fell to $120 million at quarter end. 1. **Urban Solutions**: Q2 2026 segment profit was $38 million, up from $29 million year-over-year. The segment included $44 million in additional losses from the Gordie Howe International Bridge project due to previously noted headwinds. Full year 2026 expected segment margin is 2.5% to 3%, and the segment is expected to contribute approximately 65% of total full year revenue. Q2 new awards for the segment totaled $3.2 billion. 2. **Energy Solutions**: Q2 2026 segment profit was $88 million, up sharply from $15 million year-over-year, driven primarily by higher closeout profits on completed megaprojects. Full year 2026 expected segment margin is 6% to 7%, and the segment is expected to contribute approximately 20% of total full year revenue. 3. **Mission Solutions**: Q2 2026 segment profit was $44 million, up from $35 million year-over-year, driven by improved fee performance across the U.S. Department of Energy portfolio. Full year 2026 expected segment margin is 6%, and the segment is expected to contribute approximately 15% of total full year revenue.

Risks & headwinds

- The Gordie Howe International Bridge project faced Q2 headwinds from foreign currency exchange fluctuations, the bankruptcy of a subcontractor, and client-driven scope changes, with $44 million in incremental Q2 losses; remaining commercial matters are still being resolved. - Ongoing geopolitical tensions in the Middle East create uncertainty, though current backlog work in the region has not yet experienced significant disruption. - Remaining legacy loss projects still require an additional $94 million in future funding, expected to be completed in Q3 2026. - Many new potential project awards are dependent on client final investment decisions, regulatory permitting, and commodity price stability, creating uncertainty around the timing and volume of future bookings. - New large multi-year projects extend backlog duration, with peak revenue and earnings contribution not expected until late 2027 and early 2028.

Analyst Q&A

• Q: What is normalized profitability for Energy Solutions excluding favorable closeout of legacy megaprojects, and how is the pace of project acceleration affecting 2026 book-to-bill? /

  A: Most closeout gains were already included in original guidance, with only a small acceleration from the second half into Q2. In the back half of 2026, Energy Solutions' profit contribution will decline as the segment reloads with new front-end work, and Urban Solutions will become the largest contributor to EBITDA, an inversion from the first half of the year. Management maintains guidance for full year book-to-bill well above 1, with a strong pipeline of potential awards for the second half, though exact timing of final awards remains difficult to predict.

• Q: What is the progress on the remaining legacy mining project, and how do data center and power opportunities translate to future bookings and earnings? /

  A: The legacy mining project is advancing, with early portions already handed over to the client, but discussions on additional scope changes are ongoing and are expected to take a couple of months to resolve. Management views power as the strongest opportunity in the broader data center ecosystem, with multiple front-end projects progressing toward EPC awards expected in the first half of 2027. Data center opportunities are evaluated selectively, as many do not fit Fluor's risk and size criteria.

• Q: When will the Centris Fuel Enrichment Facility start contributing revenue, and is the 2026 EBITDA guidance risk-adjusted for remaining legacy projects? /

  A: Early work has already started, with some modest revenue contribution in 2026, and the majority of revenue will be recognized in 2027 and beyond, consistent with the percent-of-cost completion method. Management confirms that guidance reflects a full risk-adjusted assessment of all remaining projects across the portfolio, and the firm is comfortable with the updated guidance range.

• Q: What is the margin profile of new awards, and what is the strategy for potential inorganic acquisitions? /

  A: New awards are showing improving margins relative to existing backlog, driven by selective commercial negotiations and a focus on high-value projects. Most new awards are on lower-risk reimbursable terms, with increasing margins even on these contracts, and future lump-sum projects are structured with sufficient contingency to protect margins. Potential acquisitions will focus on capabilities aligned with core strategic end markets: power, mining, government security services, and life sciences, with no details available on specific targets at this stage.