Is URS Corp Undervalued?

Posted Dec 1st 2010 5:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

The shares of professional engineering/construction services provider URS Corporation (URS), first discussed on June 5, 2009 at a price of $51.56, have cleared the danger zone I wrote about earlier this fall, so now would be a decent time to consider scooping-up some shares. URS should trade above $50 in 2011, according to my analysis

Look for URS to post a modest 2-3% revenue increase in 2010, followed by a 10-15% rise in 2011. Long-term, both federal government-related and private sector (industrial and commercial) work should gradually attract more institutional investors (IIs) back to the stock in 2011, after a portion of the less-patient IIs exited their URS position this year.

The Thomson Reuters First Call FY2010/FY2011 EPS estimates for URS are $3.69 to $3.68. That FY2011 EPS estimate looks about 5% low, according to my analysis.

Technically, URS moved back above the key, 50-day moving average in October, and a re-test of the 50-day MA in November held -- a bullish sign.

2011 Outlook: I view URS Corp as a long-term play, but if you're looking to sell URS within the year, it's probably best to take your profits after it rises to $48-49, if it fails to clear $50.

Stock Analysis: I consider URS Corp to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd 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, I wouldn't buy more than 50% of my URS position before February 2011 and I'd put a sell/stop loss at: $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: construction, URS, URS Corp