URS Corporation (URS) received a contract for its engineering, procurement, and construction services from Hoosier Energy Rural Electric Cooperative Inc. The services are to upgrade the present flue gas desulfurization systems at Hoosier Energy’s Merom Generating Station in Indiana. It is expected to be completed by the summer of 2013.
The contract for URS is valued at $113 million. The Merom Generating Station has been receiving engineering services from URS Corp. since May 2009. The company believes the present relationship will be further extended with the receipt of the current contract.
URS Corp. continues to see favorable trends in the federal government sector. There is strong funding for O&M programs, which signifies increased opportunities to support long-term Department of Defense initiatives and stable funding for the Department of Energy's environmental and nuclear programs, including the National Nuclear Security Administration.
In 2011, the company expects its federal sector to benefit from its large indefinite delivery contracts with the Department of Defense as well as new opportunities with the Department of Energy. Further, the company is not dependent on any single contract on an ongoing basis, and as such the loss of any single contract would not have any material adverse effect on its business.
However, since the company’s largest clients are from the federal market sector, loss of clients such as the federal government, the U.S. Army, or DOE would have a material adverse effect on its business.
As a government contractor, the company must comply with various procurement laws and regulations, subject to regular government audits. The violation of any of these laws and regulations could result in sanctions, contract termination, forfeiture of profit, harm to its reputation or loss of its status as an eligible government contractor.
URS Corp. provides engineering, construction and technical services. As such, it offers a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients globally.
We continue to maintain a Neutral rating on URS Corporation for the long term. The company has a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.
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