Why URS Corp. Shares Tanked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of URS Corp. (NYSE: URS  ) have fallen by 13% today after the company provided lousy preliminary results for its 2013 fiscal year. URS also disappointed investors with underwhelming guidance for 2014.

So what: URS's preliminary 2013 report shows roughly $11 billion in revenue -- at the low end of its $11 billion-$11.5 billion forecast and below analysts' $11.15 billion projection -- and a new range of $3.20-$3.30 in earnings per share. This latter figure was far below URS's own previous guidance of $4.10-$4.25 for the 2013 fiscal year, and analysts were expecting $4.09, which was conservative by that standard but wildly optimistic in light of URS's whiff. The company now expects 2014 revenue to range from $10.8 billion-$11.2 billion, and anticipates between $3.20 and $3.50 in EPS. Analysts were looking for $11.28 billion in revenue and $4.20 in EPS, so there was understandably some forward-looking disappointment as well.

Now what: URS now trades at an effective trailing P/E of roughly 13 and has a forward P/E of no more than 12.2, so shares certainly look cheap today. But URS's top line has only grown by 9% in the past five years and free cash flow is 25% lower than it was five years ago, so the company doesn't appear to be doing much to grow. Since there's no real growth expected for next year, you can take one of two positions here: you can bet on a rise in valuation or you can just stay on the sidelines and look for better opportunities.

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  • Report this Comment On February 17, 2014, at 2:06 PM, BrianRSweet wrote:

    As an employee, these results don't really surprise me. When I joined URS 5 years ago, it was just at the time the economy went into the downturn. My local office had between 60-65 staff working on various projects in the field. We are now down to 38. What most recently is of concern, and should be to shareholders are upcoming changes to their vacation and sick time policies that will affect employee morale. URS is switching to a PTO policy, allowing employees to use PTO for either sick or vacation time. While that would appear to be a plus, the devil is in the details. What went from 15 days vacation and 5 sick days a year, will now be 18 days a year for those of us at URS with 5-10 years service, a net loss of two days off per year. This is not how any company keeps good people. I expect to see an exodus of good talented people over the next year or two.

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