On April 3, shares of VSE Corp. (VSEC) achieved a new 52-week high of $57.56 per share. The company’s strong fundamentals and increased government spending drove the momentum. The stock returned over 130% in the 1-year period compared with the NASDAQ’s return of about 30%.
The company’s business had been sluggish since 2012 owing to the weak conomic conditions. Also, the decline in demand from the U.S. government in 2013 also impacted the company's business negatively. However, investors’ sentiments improved as the budgetary woes finally ebbed and Obama’s $1.1 trillion Omnibus spending measure bill was passed in Jan 2014.
In last month, the company had also received contracts worth $13.4 million from the Foreign Military Sales (FMS) Naval Ship Transfer and Repair (N*STAR). The contract was part the Naval Sea Systems Command (:NAVSEA) International Fleet Support Program.
Moreover, the company’s persistent efforts to diversify and expand its business while simultaneously reducing costs were some of the key drivers behind the company’s growth in the last year. Moreover, VSE’s robust cash flow position allowed it to reduce its debts significantly in 2013.
The company is now expanding its products and services for the markets other than U.S. Department of Defense. These high margin businesses comprised more than 50% of the company’s total sales in 2013.
VSE has seen positive earnings estimate revision, which reflected analysts’ bullish stance on the company. There has been once upward revision and no downward revision over the past 30 days. The Zacks Consensus Estimate has also risen over the same time period.
Notably, the Zacks Consensus Estimate for 2014 has increased to $4.59 per share from $4.49 per share over the past 30 days, which reflects an increase of 2.22%. For first-quarter 2014, the Estimate rose a significant 4.42% to $1.18 per share.
Another stock in the same industry that was recently in news is Foster Wheeler AG (FWLT), which scaled a new 52-week high of $33.46 per share April 2, 2014.
We assign VSE a Zacks Rank #2 (Buy) based on the rise in its share price and believe that the company has more upside potential left. Some other stocks worth consideration in the engineering and heavy industry include AECOM Technology Corp. (ACM) and Quanta Services, Inc. (PWR). Both of these have the same Zacks Rank as VSE.Read the Full Research Report on VSEC
Read the Full Research Report on FWLT
Read the Full Research Report on ACM
Read the Full Research Report on PWR
Zacks Investment Research
- Personal Investing Ideas & Strategies
- Finance Trading