URS Corp. (URS) recently announced that it expects revenues and earnings for fiscal 2013 to be lower compared with its previous guidance. The company’s lower guidance is based on a preliminary review of 2013 results. Following this news, shares of the company crashed almost 14% on Thursday, Feb 13, and closed at $42.51 versus a close of $49.36 on Wednesday.
URS reported that currently it expects earnings to be in the range of $3.20 to $3.30, compared with the previous guidance of $4.10 to $4.25 a share. In the third quarter of 2013 also, the company had trimmed the earnings guidance from $4.25 to $4.50 a share to $4.10 to $4.25.
This apart, URS Corp. expects to report consolidated annual revenues in the range of $10.8 billion to $11.2 billion which is at the low end of its previous guidance of $11.0 billion to $11.5 billion.
URS Cop. cited weak execution of orders in the company’s new Oil & Gas division (formed after the acquisition of Flint Energy Services) as the primary reason for its reduced projection of profits and turnover. Further, the company mentioned that it witnessed project delays due to residual effects of lower-than-expected natural gas prices and pipeline capacity. Both these unfavorable situations, together, had an impact of about $40 million on the operating income of the segment.
In the last-reported quarter (third-quarter 2013) as well, the oil & gas division reported revenues of $532.6 million, which declined 10.1% from $592.2 million in the third quarter of 2012. The decline was due to continued effects of unfavorable weather conditions and floods in western Canada in the previous quarter.
Apart from the top and bottom lines, the company provided a preliminary outlook on the rest of 2014 and mentioned that although it has lowered its guidance, it is positive about the company’s performance, going forward. The company’s industrial, infrastructure and power divisions continue to perform well.
However, the Federal segment is expected to be impacted by the sequestration effects. This apart, the segment also is expected to reported lower revenues year-over-year due to the slow down of the work on the DoD’s chemical weapons demilitarization program. In 2014, the company expects revenues from this program to decrease by approximately $355 million, thereby decreasing operating income by roughly $125 million.
Based on its preliminary review, URS expects 2014 operating cash flow to be between $725 million and $775 million. Further, the company is accelerating its previously-announced plan to return a total of at least $500 million to stockholders through stock repurchases and dividends by the end of 2015. URS now expects to spend approximately $350 million for stock repurchases in 2014.
URS Corp. currently holds a Zacks Rank #4 (Sell). Other better-ranked stocks in the engineering and diversified services sector include AECOM Technology Corp. (ACM), Fluor Corp. (FLR) and Quanta Services Inc. (PWR), all of which carry a Zacks Rank #2 (Buy).
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