Friday, December 17, 2010

Fluor (NYSE:FLR) Jacobs Engineering (NYSE:JEC), URS (NYSE:URS) Should Give Solid Returns in 2011

Believing the recent rebound in engineering and construction stocks is sustainable, FBR Capital has their strongest picks in the sector as Fluor (NYSE:FLR) Jacobs Engineering (NYSE:JEC) and URS (NYSE:URS).

FBR:

Engineering & Construction (E&C): "Stocks have started to rally over the past month (+15% since October 29 versus the S&P at +5%), which we believe is the beginning of a much longer cycle. Backlog has started to improve. We expect the oil & gas market to redevelop, the domestic power market to witness opportunities, federal spending to be constant, and state/local to remain unclear. Finally, strong balance sheets should limit downside risk and possibly enhance EPS growth through share repurchases and M&A. As our 2010 FBR Top Pick, Fluor (Outperform) is up 39% year to date, we believe Jacobs Engineering (Outperform) and URS Corp. (Outperform) should provide solid returns in 2011.

Specialty Contracting. "In 2011, we expect revenue growth to redevelop broadly and be complemented by improving profit margins. Emerging trends include: improving telecommunications (wireless and wireline) capex, a pickup in electric transmission coupled with a more stable electric distribution market, and a steadily improving economy that should eventually lead to a pickup in the housing market and commercial construction. M&A activity and share buybacks should also enhance growth in 2011. Our favorite small-cap specialty contractors for 2011 include Dycom Industries (NYSE:DY)(Outperform), EMCOR Group (NYSE:EME)(Outperform), MYR Group (Nasdaq:MYRG)(Outperform), and UniTek (Nasdaq:UNTK)(Outperform)."

Flour closed Thursday at $63.15, up $1.84, or 3.00 percent. Jacobs closed at $42.48, up $0.42, or 1.00 percent. URS ended the session at $43.09, up $0.53, or 1.25 percent.

Fluor (NYSE:FLR) Jacobs Engineering (NYSE:JEC) and URS (NYSE:URS)

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