URS Wins $47M Navy Contract - Analyst Blog

URS Corporation (URS) has won an engineering services contract to provide technical and programming support to the U.S. Naval Surface Warfare Center.

The contract has a one-year base period followed by four optional periods of one-year durations. It has a maximum value of $47 million for URS.

URS has been contracted to provide software engineering, research and analysis, development, testing and engineering support services.

URS continues to see favorable trends in the federal government sector. There is strong funding for O&M programs - which means increased opportunities to support long-term Department of Defense (DoD) initiatives and stable funding for the Department of Energy's (DoE) environmental and nuclear programs, including the National Nuclear Security Administration. Consequently, URS continues to expect that revenues in its federal sector will be between $4.3 billion and $4.5 billion in 2010.

With respect to infrastructure, URS' long-term outlook is very positive. State and local governments continue to fund infrastructure programs. In the previous fiscal year, states and municipalities sold billions of dollars of new bonds to fund infrastructure projects, including education and healthcare facilities as well as new roads. Key projects continue to move forward.

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 geographic areas.

In addition, URS is well-positioned to help clients build, upgrade or modify refineries to handle new types of fuels such as oil from Canada's oil sands. Energy companies have invested over $100 billion in Alberta, for example, with the goal of doubling oil production from oil sands to 2 billion barrels a day.

URS is a major a government contractor and must comply with various procurement laws and regulations, and is subject to regular government audits. As a major contractor to the U.S. federal government, URS serves a wide variety of government departments and agencies.

A violation of any of the above laws and regulations could result in sanctions, contract termination, forfeiture of profit, harm to its reputation or loss of status as an eligible government contractor.  Any interruption or termination of its government contractor status could reduce profits and revenues significantly.

URS provides engineering, construction and technical services. As such, it offers a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients globally.

It also is a major U.S. federal government contractor in the areas of systems engineering and technical assistance, and operations and maintenance. It has approximately 56,000 employees in a worldwide network of offices and contract-specific job sites in more than 30 countries. Fluor Corporation (FLR) is a major competitor.

We currently have an Outperform recommendation on URS Corporation.

 
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