URS Corp Gets Contract - Analyst Blog

URS Corporation (URS) has won a contract to provide consultancy and fabrication services for communications and electrical distribution systems at Marine Corps base Camp Pendleton in California. The order has several embedded options for additional work which brings the potential maximum value of the award to $116 million.

URS continues to see favorable trends in the government sector. There is strong funding for O&M programs -- which means increased opportunities to support long-term DoD initiatives and stable funding for the DoE's environmental and nuclear programs, including the National Nuclear Security Administration.

With respect to infrastructure, URS's 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.

Demand for the company's services is cyclical and vulnerable to economic downturns and reductions in government and private industry spending.  If the economy remains weak or client spending declines further, then its revenues, profits and financial condition may deteriorate.

Global economic conditions have caused, and may continue to cause, clients to delay, curtail or cancel proposed and existing projects. This decreases the overall demand for services, leading to weak financial results.

As a government contractor, URS Corporation must comply with various procurement laws and regulations, and is subject to regular government audits. A violation of any of these laws and regulations could result in sanctions, contract termination, forfeiture of profit, loss of reputation and 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.

We currently have a Neutral recommendation on URS Corporation.