) recently announced its Capital Allocation priorities that
include dividend payments and share repurchases, which are to be
funded by free cash flow. The remaining cash would be used to
fund organic growth and reduce debt. The board of directors
approved returning $500 million to its shareholders by the end of
This move to return cash to its shareholders and reduce debt
is in line with URS' long-term opportunities to maintain its
investment grade credit rating.
This apart, the Compensation Committee, which is part of the
board, is also in the process of redesigning the company's
incentive programs for its senior employees to further align
their performance incentives with the capital allocation
During the first half of 2013, URS generated $90 million in
operating cash flow and returned approximately $125 million to
its shareholders through share repurchases and dividends. Cash
flow from operations increased by $70.0 million in the first half
of 2013 compared with the same period in 2012. This increase was
primarily driven by the timing of billings, collections and
advance payments from clients on accounts receivables.
Prioritizing the capital allotment emphasizes management's
confidence in the company's long-term business outlook. It is
also expected to increase investors' confidence; given the
company's commitment to generate value for its shareholders.
However, according to Moody's Investor Service, this
announcement by URS is a credit negative, although Moody's
mentioned that it will not affect the company's current Baa3
rating and stable outlook. Moody's noted that URS's credit
metrics are not very strong for an investment grade company in
the engineering and construction sector.
URS Corporation is a leading provider of engineering,
construction and technical services. URS currently has a Zacks
Rank #3 (Hold). However, other companies that can be considered
at the moment are
AO Smith Corp.
). All three carry a Zacks Rank #2 (Buy).
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URS CORP (URS): Free Stock Analysis Report
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