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On May 12, shares of VSE Corp. (VSEC - Snapshot Report) achieved a new 52-week high of $67.79. The company’s strong fundamentals and a robust balance sheet drove the upside. The stock returned over 117% in the 1-year period compared with Nasdaq’s return of just about 21%.

The company recently reported first-quarter 2014 results with earnings of $1.17 per share falling short of the Zacks Consensus Estimate of $1.18 per share. However, earnings increased 18.2% compared to last year’s figure of 99 cents.

In its effort to share more profits with shareholders, VSE also announced an 11% increase in its quarterly dividend to 10 cents from 9 cents per share paid on May 5, 2014. The increased dividend will be paid on Aug 16, 2014 to shareholders of record on Jul 23.

The dividend hike is well supported by the company’s healthy financial position. In the first quarter of 2014, its cash and cash equivalents stood at $0.35 million, marking a year-over-year increase of 62.3%. Moreover, VSE’s strong cash flow position allowed it to reduce its debts significantly by 18.3% in the quarter.

The company’s persistent efforts to diversify and expand its business while simultaneously reducing costs were some of its key growth drivers. VSE has been focused on expanding its products and services to diversify its business portfolio. It now provides solutions for maintenance of vehicle, ship and aircraft as well as service life extension, and logistics support to markets other than the U.S. Department of Defense. These high margin businesses comprised more than 50% of the company’s total sales in 2013.

The company’s business had been sluggish since 2012 owing to the weak economic conditions. Also, the decline in demand from the U.S. government in 2013 impacted the company's business negatively. However, investors sentiments improved as the budgetary woes finally ebbed and Obama’s $1.1 trillion Omnibus spending measure bill was passed in Jan 2014. This is likely to benefit the company’s business in the legacy defense markets going forward.

Another stock in the same industry that was recently in news is Foster Wheeler AG (FWLT - Analyst Report), which scaled a new 52-week high of $34.41 on May 6, 2014.

VSE currently carries a Zacks Rank #4 (Sell). Some other stocks worth consideration in the engineering and heavy industry include Pernix Group Inc (PRXG) and Willdan Group, Inc. (WLDN). Both of these stocks sport a Zacks Rank #1 (Strong Buy).

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