Free Stock Research Report: URS Corp (URS)

Among the top institutional owners of engineering and construction firm URS Corp (NYSE:URS) are several hedge fund managers with an activist bent, such as Barry Rosenstein of JANA Partners, Larry Robbins of Glenview Capital Management, David Einhorn of Greenlight Capital, Clifton Robbins of Blue Harbour and Steven B. Klinsky of New Mountain Capital, most of whose stakes have increased during 4Q13.

Beating the market can be difficult when picking stocks on your own. One common source of alpha can be focusing on small cap stocks, which tend to outperform its larger peers over time. Another source of alpha can be following the smart money, by mimicking the trades of professional investors. Our research has shown that, by combining these two approaches – buying the most popular small-cap stocks recently purchased by hedge funds – one can outperform the market on average (read the details here).

URS Corp (NYSE:URS)

Last September, URS Corp (NYSE:URS) laid out plans to return $500M to shareholders by the end of 2015 through stock buybacks and dividends, funded internally from its free cash flow. More importantly, the company does not plan any major acquisitions over the next two years, which had been the largest use of its cash flow in the past (it has completed approximately $2B of acquisitions since the beginning of 2010). Coincidentally, this announcement came during a quarter in which several hedge funds purchased large amounts of the stock during the quarter. Assuming roughly $60M of annual dividend payments, its capital plan would imply share repurchases of $380M (or 11% of its market cap). Since the vast majority of the buybacks ($350M) will be completed in 2014, the impact to 2015 EPS should be maximized (at least $0.50 accretive, based on our estimate). URS does have $690M of debt maturing in Oct. 2016, which could decrease the amount of capital return to shareholders in that year but, as this debt is related to a credit facility (which tends to be maintained / refinanced for liquidity purposes rather than completely paid off), assuming URS’s business does not fall off a cliff, its cash flow generation and share repurchases should not deviate too much after 2015.

Following the company’s mid-February pre-announcement of disappointing 4Q13 results and lower-than-consensus 2014 guidance, due to execution issues in its Oil & Gas Division and project delays stemming from lower natural gas prices / pipeline capacity, the stock dropped 14% the next day and is down 12% YTD. With market expectations reset lower, URS has been setup for a rebound if it can demonstrate improved EPS through higher share repurchases.  Its free cash flow yield of 8.5% is double the level of peers but, as its capital allocation changes to one focused on returning cash to shareholders rather than growing through acquisitions, this disparity should narrow (a peer-like yield would imply a stock price more than double its current level). Any developments on increased ownership by activist investors, either new or existing, would also act as a positive catalyst.

After the market close on February 27, 2014, JANA Partners disclosed in a 13D filing that it increased its position by roughly 100,000 shares (for a 9.7% stake in the company) and will be taking on an activist role, with plans to increase shareholder value by discussing with management possible changes to its board, management, capital / corporate structure and other matters.

Disclosure: none

Recommended Reading:

Michael Zimmerman Is Betting on J.C. Penney Company (JCP), KKR Financial Holdings LLC (KFN) & Others

Free Stock Research Report: Allegion PLC (ALLE) 

Brian Sheehy and Iszo Capital’s Top Stock Picks

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!