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We recently maintained a Neutral recommendation on URS Corporation (URS - Analyst Report).

URS Corporation provides engineering, construction and technical services. It is also a major U.S. federal government contractor in the areas of systems engineering and technical assistance, as well as operations and maintenance.

Synchronized increases in manufacturing and process-related production in the U.S. and abroad have increased demand for URS’ full life cycle, engineering, environmental, construction and facilities management services.

The company believes that the proposed acquisition of Flint Energy Services will be accretive in 2012. The acquisition, expected to close in the second-quarter of 2012, will help the company to position itself well in the attractive segments of the oil and gas industry, especially in the North American oil, oil sands, and gas industry. URS continues to derive benefit from its acquisitions of Apptis, CATI Training System and BP Barber.

On February 27, 2012, the company came out with its fourth-quarter 2011 earnings per share of $0.37 compared with $0.75 in fourth-quarter 2010. During the quarter, the company recorded a goodwill impairment charge of $0.43 per share.

Earnings for the quarter also include a non-cash, after-tax charge of $0.02 per share, related to the retirement of the company’s prior credit facility and a $0.07 per share, after-tax charge related to the restructuring of URS’ international operations in Europe. Excluding these charges, earnings per share came in at $0.89 in the quarter. The Zacks Consensus Estimate was $0.98

For 2011, the company reported a loss per share of $6.03 compared with earnings per share of $3.54 in 2010. Excluding $0.02 per share related to the retirement of the company’s prior credit facility, $0.07 per share of after-tax charge related to the restructuring of URS’ international operations in Europe and $0.01 per share of after-tax charge related to acquisition expenses, earnings per share for the year came in at $3.53. The Zacks Consensus Estimate was earnings of $3.63 per share.   

Total revenue, in the quarter, was $2.39 billion compared with $2.38 billion in the prior-year quarter. For 2011, total revenue was $9.55 billion compared with $9.18 billion a year ago. URS Corp.’s backlog was $14.3 billion at the end of 2011 compared with $16.6 billion at the end of 2010.

The improving capital spending environment continues to benefit both the power and industrial and commercial sectors. Revenues from industrial and commercial sector businesses rebounded very strongly in 2011, growing 17% from 2010. Though Infrastructure revenue declined slightly in 2011 from 2010, pace of sales has increased resulting in a substantial rise in backlog of infrastructure work.

Furthermore, recovery in the power sector intensified in 2011, generating the first year-over-year growth in annual revenues since 2008. In addition, business in North America gained momentum during the year and the federal sector business continued to deliver record revenue. URS Corp.’s strategy to setup a diversified business is also a driving factor. The company is focused on building a balanced portfolio in four key market sectors.

However, the market is being affected by the economic and political turbulence, which is a cause of concern for the company. Though business in the US and Canada were at or above the expectations of the company, challenging economic conditions affected business in Europe and the Middle East. Major competitors of URS are AECOM Technology Corporation (ACM - Analyst Report), Fluor Corporation (FLR - Analyst Report) and KBR Inc. (KBR).

We currently maintain our Neutral rating on URS Corp. with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.

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