URS Corporation
(
URS
) reported solid first quarter results on May 9th, beating the
Zacks Consensus Estimate in both earnings and revenue. As a result,
analysts made significant upward revisions to their estimates for
fiscal years 2012 and 2013, helping the stock achieve a Zacks #2
Rank (Buy).
In addition, since last March, this engineering and construction
service provider has started paying a quarterly dividend that
affirms a yield of 2.3%.
First Quarter Results
URS Corporation's first quarter non-GAAP earnings came in at $1.12
per share, topping the Zacks Consensus Estimate by 7 cents, or 6%.
It was a stellar 42% increase over the same quarter in 2011.
Total revenue was $2.36 billion, up 1.7% from $2.32 billion in the
prior-year quarter. Revenue was aided by a strong performance from
the federal sector business.
Operating income came in at $163.9 million, up 24.1% compared from
$132.1 million in the year-ago quarter. This reflects an operating
margin expansion of 125 basis points (bps) to 6.9%.
In the latest reported quarter, the Federal Services Division (FSD)
reported revenue growth of 23.4% driven by contracts with the U.S.
Army to manage the destruction of the U.S. chemical weapons
stockpile and growth in the federal IT market through the
acquisition of Apptis, which URS acquired on June 2, 2011. In
addition, the contract to detect, secure and eliminate weapons of
mass destruction at locations worldwide also added to the revenues.
Outlook Reaffirmed
URS Corporation reiterated its 2012 revenue guidance of $9.9
billion to $10.1 billion and earnings per share between $3.95 and
$4.05. The company is confident of achieving its target for the
year based on its strong position in core markets. However, delays
in receipt of notices to proceed on several new contracts affected
Infrastructure revenue in the quarter. Furthermore, uncertain
conditions remain a matter of concern in a few markets.
Nevertheless, given the company's confidence, analysts raised their
estimates for 2012 and 2013. Specifically, the Zacks Consensus
Estimate for 2012 increased 2% over the last 60 days to $4.07,
implying a year-over-year jump of 15.3%. For 2013, the estimate
moved up 1% to $4.44, implying a 9.1% increase over 2012.
As is evident from URS Corporation's chart below, the Zacks
Consensus Estimate has trended up over the past two quarters.
Dividend
URS Corporation initiated a quarterly dividend of $0.20 per share
on February 27. The company has enough cash on its balance sheet to
cover the dividend payout for several years. The current dividend
payment affirms a yield of 2.3%.
Valuation Looks Compelling
Based on a 5-year EPS growth rate of 11.8%, URS Corporation's PEG
ratio comes to only 0.7, a 30% discount to the benchmark of 1 for a
fairly priced stock.
Furthermore, URS Corporation currently trades at 9.0x its forward
earnings, a 25.6% discount to 12.1x for the industry average and
32% to 13.2x for the S&P 500.
Headquartered in San Francisco, California, URS Corporation
generates about 50% of its annual revenue from its Federal Services
Division (FSD). This position was further strengthened last year
when the company acquired Apptis Holdings, provider of IT services
to the U.S. federal government. The addition of Apptis expands the
capabilities of URS Corporation in the federal IT market. The
company has a market cap. of $2.6 billion.
URS CORP (URS): Free Stock Analysis Report
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