Investopedia: Team Inc. Making The Most Out Of Maintenance

Right now "weird" may be the best word to describe the market for large-scale engineering firms and many of their customers. While utility, infrastructure and industrial construction have slowed to a crawl, activity is quite strong in the energy sector. On the other hand, not all energy is the same and many companies are trying to figure out ways to get out of operations like refining. As one of only two specialty maintenance service companies with real national coverage, Team Inc. (Nasdaq:TISI) is nevertheless seeing some solid upside from an ongoing maintenance cycle at customer refineries. 

Another Solid Quarter  
Team Inc. has been doing well recently, and this quarter was no exception, though there is definitely some deceleration in the business. Revenue rose 19% this quarter, with 13% organic growth. Across the board, Team's profitability metrics looked solid. Reported GAAP operating income rose about 24% this quarter, with adjusted EBITDA rising 22% and adjusted net income rising 29%. Management also once again raised its financial guidance for the full year.

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Investopedia: Shaw Has Value, But Needs A Spark

Value traps can drive investors to distraction; nothing is quite as frustrating as owning a quality company but seeing the market ignore its long-term virtues because of short-term challenges. Such could be said for Shaw Group (Nasdaq:SHAW). Although the construction of new nuclear plants looks like a non-starter, the company still has a key position in servicing existing plants, not to mention ongoing opportunities in markets like environmental remediation for utilities and more general industrial and manufacturing construction. The question for investors, though, is how much pain they can tolerate in the short run as capex spending seems to be stuck on pause.

A Decent Start to the Year  
Shaw gave some encouragement to its shareholders on Wednesday morning with its earnings release. Revenue fell 2% from the year-ago level, but was in line with analyst expectation. Although the company picked up some business in the Mideast and Latin America, Asia and Europe were notably weaker. Within the segments, not a lot changed - the company's large power business saw revenue fall about 2%, while plant service and environmental/infrastructure traded off above-average and below-average growth.

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Jacobs Still Looking To Build That Ladder

It is really no surprise that large engineering and construction companies are reporting uninspiring trailing growth these days. Refineries, highways, and manufacturing plants do not get built overnight and the panic that spread through the markets in 2008 held up a lot of contracts because of economic and funding concerns. The question for companies like Jacobs Engineering (NYSE:JEC), then, is how quickly business can get back to normal. 

A Sluggish End to a Tough Year
Jacobs ended its fiscal 2010 with something of a whimper. Revenue for the fourth quarter was down 8% on a year-over-year basis, while full-year revenue fell about 14% on a reported basis. That quarterly number was also about 8% shy of the average analyst guess, though, so there could be some risk of modest downward revisions (and all the attendant negative near-term momentum that can produce). 


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Has Fluor Built Its Foundation?

Last week, we heard from Nucor (NYSE:NUE) and Steel Dynamics (Nasdaq:STLD), and both companies were pretty cautious about business conditions in the second half of 2010. Since both companies are leveraged to commercial construction, that is relevant. The engineering and construction industry, though, looks as though it might be building a base and perhaps getting ready to rebound.

Analysts seem relatively confident that capital spending is going to resume in the energy market, mining projects continue to go forward, and there is a general assumption that we are seeing the worst in the government-funded infrastructure business (so it will start to get better).

Interestingly, Fluor's (NYSE:FLR) stock tracks those steelmakers relatively closely, so who should we believe? Are the engineering companies (and steel) simply building a base for a second half rally, or are we looking at a sluggish environment for the next six months?


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