URS Corp. Earnings Miss Ests, Retains View - Analyst Blog

URS Corporation (URS) reported first-quarter fiscal 2014 earnings of 37 cents per share on May 13, 2014. The figure fell short of the Zacks Consensus Estimate of 67 cents by 44.8%. Quarterly earnings were down 61.5% year over year from 96 cents.

URS Corp. reported cash earnings per share (EPS), which is operating cash flow/diluted number of shares. Cash EPS for the first quarter stood at 60 cents a share versus $1.22 a share in the prior-year quarter.

The decline in profits was attributable to the company’s demilitarization (Chem Demil) program.

Total Revenue

Total revenue in the first quarter came in at $2.5 billion, down 9.5% from $2.80 billion in the prior-year quarter and it also missed the Zacks Consensus Estimate of $2.7 billion.

At the end of the quarter, the company had a backlog of $11.2 billion, down 0.9% from $11.3 billion at the end of Jan 2014. It reported book of business worth $23.0 billion as against $22.8 billion as of Jan, 2014.

Segment Result

For the first quarter, theInfrastructure and Environment segment reported revenues of $850 million, down 5.3% year over year. On the other hand, operating revenues totaled $36 million, down 10% from $40 million recorded in the prior-year quarter.

The Federal Services segment generated revenues of $649 million and operating income of $57 million in the first quarter of 2014. Revenues were down 28.4% while operating income was down 50.4% year over year. Revenues from the chemical demilitarization contracts totaled $89 million while operating income stood at $23 million compared with $252 million and $90 million, respectively, in the year-ago quarter.

In the first quarter, the Energy and Construction segment recorded revenues of $544 million and operating income of $5 million compared with revenues of $538 million and operating income of $12 million in the prior-year quarter.

The Oil & gas segment registered revenues of $514 million, up 1.2% year over year, while operating income came in at $11 million compared with $9 million in the first quarter of 2014.

Income and Expenses

Operating income in the quarter totaled $87 million, down 43.1% from $153 million in the prior-year quarter.

Balance Sheet, Cash Flow, Share Repurchase and Dividend

Cash and cash equivalents were $231 million at the end of the quarter, compared with $284 million as on Jan 3, 2014. Long-term debt was $2.1 billion as against $1.7 billion as on Jan 3, 2014 and shareowners’ equity stood at $3.8 billion as on Mar 3, 2014.

The company’s operating cash flow in the first quarter of 2014 was $132 million, versus $50 million in the prior-year quarter, reflecting an increase of 62.1%. The upside was driven by efficient working capital management.

URS Corp. is working on its prior plan to return at least $500 million to its shareholders through stock repurchases and dividends by the end of 2015. During the first quarter of 2014, the company repurchased 5.7 million shares worth $266 million and paid $15 million in dividends.

Outlook

Following the earnings release, URS Corp. reiterated its guidance for fiscal 2014. The company expects revenues for the year in the range of $10.8–$11.2 billion while EPS is projected in the $3.20 to $3.50 band.

Cash EPS for fiscal 2014 is expected in the range of $4.13–$4.43 a share, on a fully diluted basis..

Meanwhile, operating cash flow is projected in the $725–775 million for fiscal 2014.

URS Corp. currently has a Zacks Rank #4 (Sell). However, some better-ranked stocks in the engineering and diversified sector worth considering at the moment include Pernix Group Inc. (PRXG), Willdan Group Inc. (WLDN) and Enersys Inc. (ENS). Pernix and Willdan sport a Zacks Rank #1 (Strong Buy) while Enersys has a Zacks Rank #2 (Buy).

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