URS Awarded Air Force Contract – Analyst Blog

URS Corporation (URS) announced that it has been awarded a contract to provide Unmanned Aircraft System (UAS) communications and maintenance support to the Air Force’s 432nd Wing at Creech Air Force Base in Nevada and the 49th Fighter Wing at Holloman Air Force Base in New Mexico.

 

The five-year contract is valued at $95 million. Under the terms of the contract, URS will provide communications, operations and maintenance support, and design, development and sustainment services for Unmanned Aircraft System Operations Center Support mission systems. This program provides critical data, voice interconnectivity and video relays to enable pilots and sensor operators to fly and control UASs from centers worldwide.

 

URS continues to see favorable trends in the federal government sector. There is strong funding for O&M programs – which means increased opportunities to support long-term DoD initiatives and stable funding for the DoE’s environmental and nuclear programs, including the National Nuclear Security Administration. Consequently, URS continues to expect that revenues in its federal sector will be between $4.3 billion and $4.5 billion in 2010.

 

With respect to infrastructure, URS’ long-term outlook is very positive. State and local governments continue to find resources to fund infrastructure programs. In the previous fiscal year, states and municipalities sold billions of dollars of new bonds to fund infrastructure projects, including education and healthcare facilities as well as new roads.

 

Demand for its services is cyclical and vulnerable to economic downturns and reductions in government and private industry spending. If the economy remains weak or client spending declines further, then its revenues, profits and financial condition may deteriorate. Global economic conditions have resulted in clients delaying, curtailing or canceling proposed and existing projects. This decreases the overall demand for services, leading to weak financial results.

 

As a government contractor, it must comply with various procurement laws and regulations, and is subject to regular government audits. A violation of any of these laws and regulations could result in sanctions, contract termination, forfeiture of profit, harm its reputation and  tamper its status of an eligible government contractor. Any interruption or termination of its government contractor status could reduce profits and revenues significantly.

 

URS 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. It is also a major U.S. federal government contractor in the areas of systems engineering and technical assistance, and operations and maintenance.

 

We currently have a Neutral recommendation on URS.