URS Corp (URS)

TMFRhino (66.00) Submitted: 9/26/08 3:32 AM : Start Price: $38.94 URS Score: 14.43

This is a very tempered recommendation.





I don't personally like the way URS does business. Engineering design services is currently in a wave of consolidation, large firm growth is being driven by acquisition rather than internal growth. In contrast to many of their rivals, URS doesn't purchase smaller firms for integration, but rather for the strength and value of their government contracts. I think in the long term this is bad business.





So a beginning caveat, I like the industry URS is in more than the company itself.





Here's an excerpt from the industry's flagship publication, ENR, regarding growth rates for the industry:





"ENR’s list of the Top 500 Design Firms. As a group, they generated a total of $80.62 billion in revenue last year, up 15.8% from $69.61 billion in 2006. This growth was reflected in domestic and international markets, with U.S. projects yielding revenue of $60.95 billion in 2007, up 11.4% from 2006. Revenue from projects outside the U.S. grew 32% for the Top 500, to $19.67 billion. "





The US Infrastructure is crumbling, The American Society of Civil Engineers estimates that there's an immediate need for $1.6 trillion in infrastructure work. This is work that NEEDS to get done, and eventually money will be found in municipal and state governments. All this leads to huge growth for the industry.





I think the company will perform better as it digests some of the larger acquisitions it's made over the past couple years (Specifically WGI).





However, for a longer term play in the industry, look to AE firms(Architecture/Engineering) that will have better operating margins.

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