Updated Research Report on URS - Analyst Blog

On Apr 10, 2014, we issued an updated research report on URS Corporation URS. The company had earlier reported weak quarterly and fiscal 2013 results. Moreover, the company's backlog for the year was also down from 2012 by almost 15%.

The company reported a positive earnings surprise in one of the last four quarters, with an average beat of 5.5%. It reported weak earnings in the fourth quarter and fiscal 2013, where quarterly earnings were down 72.6% year over year, but were above the Zacks Consensus Estimate by 36.8%.

Weak execution of orders in the company's new Oil & Gas division (formed after the acquisition of Flint Energy Services) was cited as the primary reason for its reduced projection of profits and turnover. Further, the company mentioned that it witnessed project delays due to residual effects of lower-than-expected natural gas prices and pipeline capacity.

In fiscal 2013, the company was impacted by planned budget cuts by the defense sector and it was further hit due to weak execution of projects as a result of lingering effects of lower-than-expected natural gas prices and pipeline capacity. Further, the company reported book of business of $22.8 billion, down from $24.9 billion as on Dec 28, 2012.

The company's largest clients are from the federal market sector. The Federal segment has been a drag on the company's income for a while due to lesser contracts from the military department. The Federal services sector has been reporting lower revenues for approximately the past four quarters due to the continuing delay in procurement decisions and reduction in anticipated spending against previously awarded contracts.

Further, ongoing uncertainty related to the political impasse that led to the U.S. government shutdown and its subsequent effects resulted in lowered income for the company in fiscal 2013.

However, apart from project execution issues, URS Corp.'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 total revenues compared with just about 8% during the fourth quarter of 2011.

URS Corp currently holds a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the sector include Quanta Services Inc. PWR, VSE Corp. VSEC and Willdan Group Inc. WLDN, all of which carry a Zacks Rank #2 (Buy).