On May 20, 2013, we retained URS Corporation (
) at Neutral, following its first-quarter 2013 results. Strong
performance in the oil & gas business has been fully offset
by weak performance in the Federal and Construction business.
Why the Retention?
On May 9, URS Corp. reported mixed results for the first
quarter of 2013, with its earnings down 10.3% year over year
while revenues grew 18.7% year on year. Profits for the company
are uneven as the company primarily generates revenues from
large-scale projects which vary from quarter to quarter. However,
revenue growth in the quarter was driven by continued strength of
the energy and oil & gas sectors.
The company's earnings have managed to beat the Zacks
Consensus Estimate in only 1 out of the last 4 quarters, with a
negative surprise of 2.57%. The company has missed the Zacks
Consensus Estimate consecutively in the last two quarters of
2012. Following the earnings release the Zacks Consensus Estimate
for the second quarter of 2013, full year 2013 and 2014 have hit
a plateau at 98 cents, $4.34 and $4.73 respectively.
URS is one of the world's leading companies providing
engineering, construction and technical services. The company's
oil & gas business has been demonstrating strong performance
since the acquisition of Flint Energy in 2012. During the fourth
quarter of 2012, the oil & gas segment alone contributed 29%
of the total revenues. In the most recent quarter (1Q13),
revenues from this segment grew a robust 250%.
However, URS is plagued by the inconsistency in the Federal
Services segment which contributed about 40% of the total
consolidated revenue in the year 2012. URS is adversely impacted
by the continuing delay in procurement decisions and reduction in
anticipated spending against previously awarded contracts. In
addition, the company's Energy and Construction divisions are
also witnessing weak growth due to a large gap between the last
finished projects and the new ones that are being completed.
Other Stocks to Consider
URS has a Zacks Rank #4 (Sell). While we are bearish on URS in
the near term, engineering company stocks such as
Quanta Services Inc
Harris & Harris Group Inc
Willdan Group Inc
) warrant a look. All three stock carry a Zacks Rank #2
QUANTA SERVICES (PWR): Free Stock Analysis
HARRIS & HARRIS (TINY): Get Free Report
URS CORP (URS): Free Stock Analysis Report
WILLDAN GROUP (WLDN): Get Free Report
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