URS Corp (NYSE:URS)
is another key infrastructure bet, as a worldwide provider of architectural and engineering services. URS posted 1Q results that were less than impressive. EPS was $0.96 compared to $1.12 for the same period last year and backlog fell 4% sequentially. Also, from a balance sheet standpoint, URS Corp (NYSE:URS) has cash of only $250 million while long-term debt is upwards of $2 billion.
However, revenue is expected to be up 9% this year due to strength in the energy markets, namely oil and gas. But, what remains is a big headwind for the smaller engineering service companies. Fluor, with its superior balance sheet, can start and run projects prior to receiving payment. This gives the company a distinct advantage over other companies that require timely payments.
Hedgie trade
Going into the second quarter, Fluor Corporation (NEW) (NYSE:FLR) had the most hedge fund interest among major peers, with 32 hedge funds long the stock. This was a 14% increase from the previous quarter and includes Impala Asset Management with the largest position, worth $51 million (see Impala’s top picks).
Meanwhile, Jacobs Engineering Group Inc (NYSE:JEC) had the lowest interest among the three, with 16 hedge funds long the stock, a 24% decrease from the first quarter. Kerr Neilson’s Platinum Asset Management had the most valuable position in the stock, accounting for 4.9% of its total 13F portfolio (check out Platinum’s high yielders).
URS Corp (NYSE:URS) had 19 hedge funds long the stock, where Glenview Capital had the largest position worth $215 million (see Glenview’s top picks).
Bottom line
Fluor does appear to be expensive. The stock trades at 21.2 times earnings and 0.3 times sales, while URS is at 11.5 times earnings and 0.3 times sales, and Jacobs Engineering Group Inc (NYSE:JEC) 15.3 times earnings and 1.0 times sales.
It’s no surprise that Fluor Corporation (NEW) (NYSE:FLR) commands a premium multiple. It serves multiple markets and various industries. Even with this premium valuation, Fluor still has a low PEG ratio of 1.2 that makes it a growth at a reasonable-price opportunity. I prefer Fluor to either Jacobs or URS Corp (NYSE:URS).
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool owns shares of Fluor Corporation (NEW) (NYSE:FLR).
The article This Stock Can Boost Your Portfolio’s Infrastructure originally appeared on Fool.com.
Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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