FLR--important article here on today's action
Shares in two major U.S. engineering and construction firms plummeted Wednesday, as Fluor Corp. (NYSE:FLR - news) warned of a weaker second quarter and McDermott International Inc (NYSE:MDR - news) said a unit sought bankruptcy protection.
The Standard and Poor's Engineering and Construction Index (^SPCONT - news) fell 12.85 points, or 11.37 percent, to 100.21 in the early afternoon as its only components, McDermott International and Fluor Corp came off sharply.
By contrast, the wider market S&P 500 Index (^SPX - news) was up 1.05 points, or 0.08 percent, at 1,353.22 points.
Fluor Corp shares fell by 4-1/8 to 33-7/8, compared with a year-high of 48-8/16 and year low of 26-3/16.
The Aliso Viejo, California-based company on Tuesday reported fiscal first-quarter 2000 net profits that met estimates, but also warned of a weak second quarter.
Fluor reported net income of $52.3 million, or 69 cents per share, on revenues of about $3 billion in the three months ended Jan. 31, versus a profit of $51.1 million, or 68 cents a share, on revenues of $3.4 billion a year ago.
Analysts were expecting 69 cents a share.
``These are separate issues. McDermott is much different than Fluor. Fluor announced results yesterday which might have been a little shy of some people's expectations,' said analyst Michael Dudas of Bear Sterns
``Despite the fact orders were good in the first quarter and the business outlook looks good in the second half of the year, they were a little light from the coal business,' he said.
He said that side of Fluor's business was hit in the quarter, causing the operating profit to be a little less than what investors may have anticipated.
``The market is very unforgiving in this kind of environment,' Dudas said.
``The profit warning was for the second quarter, which might be a few pennies either way, and the expectations can more than make it up in the second half of the year, but I guess people that have a shorter time horizon took profits,' he added.
Fluor Chief Executive Phillip Carroll said Tuesday that the firm anticipates a slightly weaker second quarter, followed by a stronger second half, ``as our earnings improvement becomes more broadly based across our business enterprises.'
Also in the news, Fluor said Wednesday it will close its facility in Marlton, N.J., eliminating more than 300 jobs, and move its pharmaceutical operations to South Carolina.
McDermott International shares were off 1-11/16 at 10-3/16, having fallen more than 20 percent at one point to a low of 9-3/4. Its year-low was 7-4/16 while its high was 32-8/16.
Standard & Poor's on Tuesday lowered its ratings on McDermott International and wholly owned subsidiary, McDermott Inc., and placed the ratings on CreditWatch with negative implications.
The downgrade came after The Babcock & Wilcox Co., a McDermott Inc. subsidiary, on Monday filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
The filing was precipitated by rising asbestos claims at Babcock & Wilcox, a leading maker of electrical power generating equipment, which had been an important producer of income and cash flow.
For the nine months ended Dec. 31, power generation systems provided nearly 40 percent of McDermott International's $1.9 billion of consolidated revenues and more than 40 percent of the $120 million of segment operating income.
``McDermott announced that one of their units filed for Chapter 11 bankruptcy ... That's the news,' Dudas said.
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