建筑业Q4预览：预期已经重设但仍有一些不确定性需要解决

1、Global Research3 February 2019Engineering & ConstructionQ4 preview: Expectations already reset but some uncertainties to addressStocks were reset in Q3 earnings, but we see a mixed outcome for Q4The first full E&C earnings release is expected on 2/5 (ACM F1Q19). For the sector, we think the expectat

2、ions are lower going into the December quarter prints, but the reality of lower oil prices and a paused government shutdown will need to be incorporated into outlooks. We think that infrastructure and general public construction will hold up well, but large oil related projects, including LNG, could

3、 face further delays. Stocks that could surprise positively in the quarter include MDR and KBR, although we have reduced our 2018E EPS on MDR to $1.71, from $2.07 to reflect lower expected margins in the Middle East and North and South America. We see some risk relative to expectations on PWR, FLR a

4、nd TPC. We reduce our 2019 EPS estimate on FLR to $2.70, from $3.00, on lower expected E&C margins. We see JEC and ACM as relatively uneventful into the print, but we note that consensus on JEC is already above the midpoint of guidance, and govt shut down is a new headwind for both JEC and ACM.Expec

5、tations are low, but can guidance push them lower?Q4 was a highly volatile quarter for both primary sides of the E&C industry. Oil prices collapsed in October and the government shut down in December. During this volatility, the E&Cs reported mixed results for the September quarter, and the stocks r

6、epriced. That repricing and suggests expectations are generally low. We expect backlog for the group to be up, driven primarily by FLRs booking of LNG Canada. However, we see some flattening of backlogs in 1H19.Key debates: Timing of large oil/gas awards, execution, shutdown, M&AKey debates for the

7、sector included which LNG projects will get FIDed next; if and when will backlog growth turn into revenue growth; can margins benefit from better execution and better backlog mix; and the impact of the government shutdown on FY 2019 guidance.Figure 1: E&C Summary TableHeavy MachineryAmericasEquities

8、Steven Fisher, CFAAnalyst HYPERLINK mailto:steven.fisher steven.fisher+1-212-713 8634Erika Jackson Associate Analyst HYPERLINK mailto:erika.jackson erika.jackson+1-212-713 1426Nicholas AmicucciAnalyst HYPERLINK mailto:nicholas.amicucci nicholas.amicucci+1-212-882 5036SalesEBITEPSUBSConsensusBeat / M

9、issUBSConsensusBeat / MissUBSConsensusBeat / MissACM$4,957$5,019In-line$189$186In-line$0.56$0.53BeatFLR$4,871$4,815In-line$141$141In-line$0.66$0.61BeatJEC$3,931$3,930In-line$216$221Miss$1.00$1.06MissKBR$1,277$1,243Beat$94$88Beat$0.36$0.38MissMDR$2,489$2,641Miss$201$217Miss$0.45$0.22BeatPWR$2,919$2,9

10、47In-line$196$194In-line$0.90$0.90In-lineTPC$1,470$1,369 Beat$89$82 Beat$0.87$0.79 BeatSource: UBS estimates, FactSet HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 29. UBS does and se

11、eks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

12、ContentsTOC o 1-2 h z u HYPERLINK l _TOC_250010 Sector Overview3 HYPERLINK l _TOC_250009 Investor Sentiment5 HYPERLINK l _TOC_250008 Backlog Expectations7 HYPERLINK l _TOC_250007 Company Specifics9 HYPERLINK l _TOC_250006 AECOM (Buy, PT $40)9 HYPERLINK l _TOC_250005 Fluor (Buy, PT $67)12 HYPERLINK l

13、 _TOC_250004 Jacobs Engineering (Buy, PT $81)14 HYPERLINK l _TOC_250003 KBR (Neutral, PT $21)17 HYPERLINK l _TOC_250002 McDermott (Neutral, PT $12)20 HYPERLINK l _TOC_250001 Quanta Services (Buy, PT $43)23 HYPERLINK l _TOC_250000 Tutor Perini (Neutral, PT $19)26Steven Fisher, CFAAnalyst HYPERLINK ma

14、ilto:steven.fisher steven.fisher+1-212-713 8634Erika Jackson Associate Analyst HYPERLINK mailto:erika.jackson erika.jackson+1-212-713 1426Nicholas AmicucciAnalyst HYPERLINK mailto:nicholas.amicucci nicholas.amicucci+1-212-882 5036Sector OverviewEarnings season will kick off with ACM and JEC reportin

15、g during the first week of February (FQ1 results), followed by the rest of the group reporting Q4 and full year results toward the latter half of the month. We think MDR will be a name in focus, as investors will concentrate on two primary areas of concern: 1) whether it reports any incremental char

16、ges on its problem projects or if mgmt. has finally been able to put them in the rearview mirror and 2) any commentary surrounding Chiyoda as a going concern or its recapitalization capabilities. We also believe JEC will be among the names in focus given the negative stock reaction follow Q4 results

17、 (stock was own 11% on earnings). Fluor would be the third most watched as we await 2019 guidance and any update on LNG Canada. At a sell-side breakfast in December FLR stated that its 8-12% EPS growth target was aspirational and the Streets 2019 EPS estimates were too high, thus we would not be sur

18、prised to see 2019 guidance come in below expectations and management temper its long term EPS expectations.We think the expectations are lower going into the December quarter prints, but the reality of lower oil prices and a paused government shutdown will need to be incorporated in outlooks. We th

19、ink that infrastructure and general public construction will hold up well, but large oil related projects, including LNG, could face further delays. Stocks that could surprise positively in the quarter include MDR and KBR. We see some risk relative to expectations on PWR, FLR and TPC. We see JEC and

20、 ACM as relatively uneventful into the print, although we note that consensus on JEC is already above the midpoint of guidance, and govt shut down is an additional headwind.Figure 2: Q3 2018 Earnings Metrics UBS expectations vs. ConsensusSalesEBITEPSUBSConsensusBeat / MissUBSConsensusBeat / MissUBSC

21、onsensusBeat / MissACM$4,957$5,019In-line$189$186In-line$0.56$0.53BeatFLR$4,871$4,815In-line$141$141In-line$0.66$0.61BeatJEC$3,931$3,930In-line$216$221Miss$1.00$1.06MissKBR$1,277$1,243Beat$94$88Beat$0.36$0.38MissMDR$2,489$2,641Miss$201$217Miss$0.45$0.22BeatPWR$2,919$2,947In-line$196$194In-line$0.90$

22、0.90In-lineTPC$1,470$1,369 Beat$89$82 Beat$0.87$0.79 BeatSource: FactSet, UBS estimateNote: Sales and EBIT are denoted as “in-line” if Consensus is within 2% of UBSeKey messages coming out of Q4 were:Construction strength continued within the US markets across all regions and is expected to remain s

23、trong.E&C companies increasing focus on core areas, while divesting non-core operations, to improve cost control and enhance earnings predictability.E&C companies reiterated their commitment to efficiency through data- backed results, which could lead to an increase in R&D spend across the sector.Ba

24、cklog was down 4% sequentially, which was in-line with management commentary from 1H. Despite the booking of some large scale projects during the quarter, we expect backlog to remain roughly flat in Q4.Oil & Gas and Mining demand continued to be strong and is expected to persist for the near future,

25、 however given the recent pullback in commodity prices, we believe investors will be focused on managements commentary for 2019+ outlook .The public wallet continued to drive non-residential construction spending.Due to a more hawkish tone from the Fed and bloated balance sheets, many E&Cs laid out

26、multi-year plans to emphasize leverage reduction.Despite E&Cs taking steps to better manage project risk, many companies still recognized large charges.Overall the sector outlook soured during the quarter as project charges, (especially on LNG) macro headwinds and a tight labor market continued to w

27、eigh on the sector as whole.Key sector debates:Which LNG projects will be FIDed in 2019, which will get pushed out?What is the near term impact of the government shutdown?What are the additional steps being taken in an effort to de-risk current backlog and how will that effect the competitive biddin

28、g process moving forward?How significant of an impact will tariffs play on profitability in 2018 and will they continue to impact 2019 results?When will increases in backlog translate to an increase in sales?What are the growth prospects for commodity driven businesses such as LNG and mining vs. inf

29、rastructure vs. federal services?How will the regulatory overhang seen in pipeline construction affect the economics of LNG construction?What is the likelihood of a federal infrastructure package being passed in 2019?Will FCF be strong enough to fulfill de-leveraging efforts?Company specific debates

30、:ACM: Status of CS divestitures? Can AECOM continue to grow backlog or is total backlog now too big to be easily moved? Is organic growth sustainable? Can ACM achieve its 10-15% adj EBITDA growth in 2019? Will ACM be able to achieve targeted expansion in DCS operating margins? What is ACMs capital a

31、llocation strategy once leverage is reduced?FLR: How is LNG Canada progressing? Will the delay in Coastal GasLink lead to cost overruns for the total project? Will Q4 finally be a clean quarter? Will there be any additional charges to legacy projects? What willthe margin profile look like going forw

32、ard? Will growth translate to profit growth?JEC: Is organic growth and margin expansion in all segments sustainable? Will the govt shutdown mitigate potential guidance upside? Will mgmt. increase 2019 guidance at the investor day in February (on a segment equivalent basis, ex-ECR)? How much if any s

33、tock was bought back during the quarter?KBR: How much of an impact will the government shutdown have on its Government segment? Has leverage already peaked and will it start to decline? Is 2019 a breakout year? Will cash flow improve? When will a decision on LOGCAP be reached (will it get pushed fur

34、ther beyond April 2019)? Are there any near-term LNG prospects? Will revenue growth inflect this quarter?MDR: Will there be any more charges on any of the LNG projects? Did Chiyoda get funding through the equity raise? What are other restructuring options for Chiyoda if the equity raise does not com

35、e to fruition? What type of bids is it getting for its Pipe Fab and Tanks business?PWR: How much will Atlantic Coast pipeline delays affect 2019 guidance? Where are see the most significant opportunities in O&G? How impactful will the new legislation in BC being? Long-haul pipeline vs gathering and

36、processing which is seeing more demand? How do you think this plays into the future and how impactful will it be to segment margin? How quickly are new large electric transmission projects developing?TPC: Any updates on any of the outstanding litigation resolutions? Will key projects (i.e. CA HSR) a

37、llow for upside to consensus in 2019 and will management guide conservatively this year? Has backlog hit a near term peak? Are there any other major booking catalysts besides LA Metro stations projects? How are you thinking about capital allocation once the outstanding claims are resolved?Investor S

38、entimentSince Q3 reports, the groups average FY2 P/E multiple has fallen rather precipitously, alongside a more pessimistic 2020 outlook (FY20 EPS revisions down7% on average). We continue to believe execution risk and macros concerns (especially declining oil prices) remain the largest overhangs on

39、 the group as investor sentiment continues to sour and E&Cs will need to prove they are able to execute on large scale projects. However, we do expect burn rates to inflect in 2019 as companies begin to execute on record level backlogs. We believe the sector remains a show me story and expect invest

40、or interest to begin to rebound in 2019 as companies post clean quarters and further clarity surrounding a federal infrastructure bill comes into focus.Figure 3: Group FY2 P/E multiple17.016.015.014.013.012.011.010.09.0Jan-17 Feb-17 Mar-17Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-1

41、7 Jan-18Feb-18 Mar-18 Apr-18 May-18Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18Jan-198.0Post Q3 earnings Group FY2 P/E 2-year averageSource: FactSetNote: Group includes ACM, FLR, JEC, KBR, MDR, PWR, TPCStock prices have declined since immediately before Q3 earnings falling an average of 9%. Whil

42、e performance was broadly negative (PWR was the only stock to post gains during the period), MDR, FLR and JEC all underperformed the group. FY19 Street estimates were revised down 8.3%. FY20 Street estimates were revised down 7.4% on average, with the only upward revisions coming from KBR and PWR, w

43、hile, not surprisingly, the largest downward revision came from MDR as uncertainty surrounding legacy projects and Chiyodas ability to continue as a going concern hurt the stocks performance.Figure 4: Consensus estimate and stock price changes since right before Q2 earningsFY1 Consensus EPSeFY2 Cons

44、ensus EPSeStock PricePre-Q3 1/31/2019 Chg (%)Pre-Q3 1/31/2019 Chg (%)Pre-Q31/31/2019 Chg (%)ACM$3.01$2.74-9.0%$3.47$3.11-10.4%$32.72$30.61-6.4%FLR$2.04$1.85-9.3%$3.24$3.05-5.9%$43.86$36.57-16.6%JEC$5.33$5.22-2.0%$5.87$5.78-1.5%$72.93$64.80-11.1%KBR$1.45$1.525.3%$1.60$1.621.4%$18.33$17.20-6.2%MDR$1.5

45、4$0.94-39.2%$2.02$1.58-21.4%$13.15$8.82-32.9%PWR$2.73$2.761.1%$3.17$3.180.2%$31.20$35.3413.3%TPC$1.90$1.47-22.5%$2.86$2.25-21.3%$18.20$17.21-5.4%Average-8.3%-7.4%-8.6%Source: FactSetGroup short interest declined slightly during the quarter to 7.0% of float (vs. 7.2% as of 12/1) as shown in HYPERLINK

46、 l _bookmark0 Figure 6. TPC and MDR remain the most shorted as of 1/11; JEC, FLR and PWR the least.Figure 5: Short interest as a % of float 1 month change (as of 1/11)Figure 6: Group short interest (as of 1/11)20%15%10%5%0%-5%12.5%11.5%10.5%9.5%8.5%7.5%6.5%5.5%4.5%Oct-16 Nov-16 Dec-16 Jan-17 Feb-17

47、Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-183.5%JECFLRPWRKBRACMFLSTPCMDRShort Interest as % of Float1mo ChgSource: FactSetSource: FactSetGroup SI as Pct of FloatAverageNote: Group includes ACM, FLR, FLS, J

48、EC, KBR, MDR, PWR, TPCBacklog ExpectationsOverall, we expect a book/bill for the group of 1.1x, an increase from last quarters 1.08x. We think FLR, KBR and TPC will have book/bill ratios greater than 1x. We believe more attention will be paid to the O&G outlook for 2019+ and execution on their curre

49、nt portfolios. Beyond Q4, we believe book to bill at FLR will remain relatively flat primarily due to the booking of LNG Canada in Q4.Figure 7: UBSe 4Q18 backlog and bookingsACMFLRJECKBRMDRPWRTPCAverageBeginning Backlog21,86333,97127,10813,36110,74411,0198,516naBookings Estimate (Net)4,27910,3503,95

50、01,4151,3002,8001,900naRevenue Estimate4,9394,8713,9101,2772,4892,9191,470naEnding Backlog21,20339,45027,14913,4999,55610,9008,946naBook to bill0.92.11.01.10.51.01.31.1Prior 4 qtr avg booking4,4465,3184,9841,3981,4183,0311,494naMost recent quarter booking4,0719,6444,2531,2633,0523,708948naMost recen

51、t quarter bill5,3064,6584,1431,2772,2892,9851,123naLast quarter b/b0.82.11.01.01.31.20.81.2Source: UBS estimates, company reportsNote: JEC and ACM current estimates are for F4Q18Notable announced awards during the quarterFigure 8: Awards announced intra-quarterCompanyAwardAnnouncementContractNotesda

52、tevalueAECOMHanford-site extension10/30/18$700mExtension of agreement to manage waste storage tanks at theHanford Site in WA, JV with Atkins Nuclear Secured, LLCFlourUK Offshore Asset Integrity Contract Ext.10/18/18Will be booked in Diversified Services segment.FluorLNG Canada10/2/18$8.4bFLR will bo

53、ok its $8.4b share of the $14b contract in Q418FluorLithium and Boron Mine Project in NV11/20/18FLR will book the feasibility study contract in Q4 and expects to book the full EPCM contract value in 2019; first production 21.FlourPhase 1: Red and Purple Line Modernization12/12/18$2.1bJV with Walsh C

54、onstruction, FLR will book its share of design andconstruction contract in Q119.JacobsGeorge R Brown Convention Center Improvements11/7/18Selected as the architect and engineer for planned improvementsJacobsUS Navy Intelligent Asset Management11/14/18Max. $241.7mMaximum value is applicable to the ba

55、se period of performanceand seven one-year options.JacobsCity of Waterbury Wastewater Utilities11/15/18$62m10-yr contract with the City of Waterbury Connecticut.JacobsLangley Research Center Contract Ext.11/21/18$46mExtension is a one-year option, bringing total contract value to$214m, extending per

56、formance period through 9.2019JacobsKarratha Gas Plant12/2/183-yr outline agreement from Woodside Energy Ltd for brownfield engineering and procurement servicesJacobsHighways England 6-Yr Framework12/11/18Partner with Costain to develop, design and construct capital road projects.KBRBrowse to NW She

57、lf Development10/11/18Engineering work will be performed through the end of 1H19, KBR will book into backlog in Q418.KBRSpace Geodesy SLR ground systems10/15/18$48mEstimated revenues to be booked in Govt Services segementKBRYixing City Ammonia Plant10/18/18LBED package for a new 1.5k metric ton/day

58、synthesis unitKBRUSSOCOM Preservation of the Force and Family11/5/18$500m5 base years w/ 3 option yearsKBRQatar Expressway Extension11/6/18Work will be performed over the next 2 years, w/ 1 year optionKBRPapua New Guinea DoP11/26/18Ongoing, consulting, advisory and engineering services to new and ex

59、isting upstream, LNG and downstream developments.KBRThoothukudi Ammonia Plant Revamp11/28/18Will supply an ammonia converter basket for the project.KBRLOGCAP IV Task Order Mods12/11/18$114mTwo task order modifications, for logistics support in EU andArabian PenninsulaKBRITES-3 Service Contract1/7/19

60、$12.1bWon a seat on the 9 year IDIQ contractKBRRemote Diego Garcia Navy Base1/14/18$62mContract modification to continue providing BOSS in the BritishIndian Ocean TerritoryMcDermottZama Field Development11/15/18JV with BHGE, MDR will manage the engineering svcs and provide follow-on pre-FEED service