URS Corporation is undervalued

Posted Dec 11th 2009 12:20PM by Joseph Lazzaro
Filed under: Stocks to Buy

URS Corporation's (URS) stock continues to correct -- it's down about 20% since the June buy call -- but investors should view the pull-back as a buy opportunity, and I'm reiterating my recommendation at $51.56 on June 6, 2009. Here's why:

URS Corp's likely stock trend is higher because industrial and commerce power project activity should bottom in the quarters ahead, and that fact, combined with a lack of project cancellation by state and local governments, and new federal projects, should convince institutional investors (IIs) that URS's revenue growth will accelerate in FY2010. The First Call FY2009/FY2010 EPS estimates for URS are $3.09 to $3.26.

Further, margins should widen in 2010, and URS's balance sheet remains strong. One potential speed-up: a shortage of skilled engineers, if the U.S. economic recovery accelerates. There is no shortage now, with U.S. unemployment high, nor should one appear before late 2010.

Technically, as noted, URS's stock chart has pulled back, but it has double-bottom support at/near $37. Given URS's gain in 2009 -- URS traded around $27 in March before surging to $53 -- view the pull-back as a correction, combined with year-end profit taking by selected short-term IIs. Look for URS to rise substantially in 2010.

Stock Analysis: URS Corporation is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in URS now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your URS position before February 2010. Sell/stop loss if you were to buy shares in this company: $22.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: URS, URS Corporation