URS Corporation (URS - Analyst Report) recently received an indefinite delivery/indefinite quantity, multiple award contract from the U.S. Army Engineering and Support Center, Huntsville, AL. The scope of the contract includes providing design-build services for the Medical Repair and Renewal Program in the continental U.S. and abroad. In addition, the contract also involves repairs, renovations and procurement along with installation and maintenance of required equipment and systems.
The contract is valued at about $585 million and has a span of five years, comprising one base year with four one-year option periods. As per the terms of the contract, URS will either need to bid or will be awarded tasks to design and build U.S. Army facilities.
The contract will be included in the company’s Federal services segment which comprised about 40% of the total revenues generated by URS in the year 2012. Prior to this contract, URS assisted the U.S. military in performing medical facilities design and build at the Keesler Air Force Base Medical Center following Hurricane Katrina. URS also helped the U.S. military to renovate the base.
Following this, URS received another contract for the design-build of a new Medical Education Training Complex at Fort Sam Houston, Texas. URS’ past track record in design-build of healthcare facilities has thus earned the confidence of the U.S. Army.
In the recently reported quarter (1Q13) Federal Services revenue was $678.2 million, down 5.4% from $717.1 million a year ago. The decline in Federal Services revenues reflects the continuing delay in procurement decisions and reduction in anticipated spending against previously awarded contracts.
URS has a Zacks Rank #4 (Sell). While we remain bearish on URS, engineering company stocks such as Quanta Services Inc. (PWR - Analyst Report), Harris & Harris Group Inc. and Willdan Group Inc. (WLDN) warrant a look. All three stocks carry a Zacks Rank #2 (Buy).