URS Matches EPS Est. on Lower Sales - Analyst Blog

URS Corp. (URS) reported third quarter 2010 earnings per share of 87 cents, which was in line with the Zacks Consensus Estimate. Earnings in the quarter increased 10.1% from 79 cents in the year-ago quarter.

Revenue

URS Corp. reported revenues of $2.34 billion compared with $2.32 billion in the year-ago quarter. The Zacks Consensus revenue estimate for the quarter was $2.49 billion.

The company's results in the quarter were driven by a strong demand for engineering and construction services in the federal sector and increased infrastructure projects, like high speed rail, mass transit and flood control. This growth was offset by challenging economic environment in the power and industrial and commercial sectors. However, the company witnessed signs of stabilization in these markets.

Segment Results

Infrastructure and Environment revenue was $818.2 million compared with $793.0 million in the year-ago quarter. Segment operating income increased 18.6%.

Federal Services reported revenues of $645.2 million compared with $653.5 million. Segment operating income increased 28.2%.

Energy and Construction segment revenues were $898.6 million compared with $886.4 million. Segment operating income increased 150%.

Income & Expenses

Operating income was $162.2 million compared with $104.2 million a year ago. Net income increased 8.7% to $70.4 million. The company incurred general and administrative expense of $21.5 million compared with $17.9 million in the prior-year quarter.

Balance Sheet & Cash Flow

At the end of the quarter, cash and cash equivalents was $556.5 million with long-term debt of $716.0 million and shareowners' equity of $4.2 billion. Net cash from operating activities was $233.4 million in the quarter.

Guidance

URS Corp. now expects its fiscal 2010 revenues to be in the range of $9.3 billion and $9.5 billion. The company reaffirmed its EPS guidance of $3.65 to $3.75 for fiscal 2010.

As companies explore and develop remote production areas such as the Arctic and the Gulf of Mexico, URS can capitalize on its ability to deploy resources across a range of project sizes and in diverse international markets. In addition, URS is well-positioned to help clients build, upgrade or modify refineries to handle new types of fuels.

However, demand for the company's services is cyclical and vulnerable to economic downturns and reductions in government and private industry expenditure. If the economy remains weak or client spending declines further, then its revenues, profits and financial condition may deteriorate. Global economic conditions may continue to lead clients to delay, curtail or cancel the proposed and existing projects. This in turn decreases the overall demand for services, resulting in weak financial results.

Major competitors of URS Corp. are Fluor Corporation (FLR), AECOM Technology Corporation (ACM) and KBR Inc. (KBR).

With approximately 42,000 employees, URS operates in more than 30 countries worldwide. URS Corporation provides a full range of program management; planning, design and engineering; systems engineering and technical assistance; construction and construction management; operations and maintenance; and decommissioning and closure services to both public and private sector companies.

We currently maintain our Neutral rating on URS Corp. for the long term. For the short term, the company has a Zacks #3 Rank (Hold).