By all measures our experience with Aggressive Holding WorleyParsons Ltd (ASX: WOR, OTC: WYGPF, ADR: WYGPY) has been negative.

Since we added it to the AE Portfolio in February 2012 the stock of the Sydney-based engineering services firm has generated a total return of minus 41.9 percent in US dollar terms.

We’ve witnessed multiple earnings-guidance downgrades during our holding period, caused by slowdowns in global energy and mining exploration and production capital expenditures.

The stock suffered a 26 percent one-day slide after management announced its most recent profit warning, on Nov. 20, 2013.

Since then WorleyParsons has actually outperformed the S&P/Australian Securities Exchange 200 Index with a US-dollar total return of 9.5 percent versus 6.5 percent for the local benchmark. The S&P 500 Index is up 11.3 percent for this period.

WorleyParsons actually bottomed at AUD14.85 on the ASX on March 25, 2014. It closed at AUD17.27 on Aug. 14, 2014, up more than 18 percent in US dollar terms from what was a five-and-a-half-year low.

At the company’s annual general meeting in October 2013 management reiterated guidance for fiscal 2014 of “increased earnings” compared to fiscal 2013 net profit after tax (NPAT) of AUD322 million.

But just six weeks later, during which time trading conditions deteriorated and a management acknowledged that an anticipated “upturn” in its markets would be delayed, the company issued revised guidance, cutting its underlying NPAT forecast for fiscal 2014 to AUD260 million to AUD300 million, with first-half underlying NPAT in the range of AUD90 million to AUD110 million.

On Feb. 26, 2014, Worley posted first-half NPAT of AUD100.7 million, right in the middle of guidance but a decline of 35.1 percent compared to the prior corresponding period.

First-half statutory revenue was up 9 percent to AUD4.82 billion, and operating cash flow surged 84 percent to AUD230 million.

Management declared an interim dividend of AUD0.34 per share, down 18.1 percent from the AUD0.415 it paid for the first half of fiscal 2013.  

Worley’s energy and mining work in Australian and Canadian and to a lesser extent its operations in Latin America and the Middle East tailed off due to the global slump in resource CAPEX that began in 2012.

The decline in the Australian business has been more severe than expected, as hydrocarbons projects in Northern Australia moved into the final construction and delivery phase, while the Minerals & Metals business remains weak.

And the Canadian business was hurt by major project deferrals and additional costs incurred in its construction and fabrication business WorleyParsonsCord.

Business in Latin American business slowed down due to a soft global minerals and metals market, while results in the Middle East withered as a result of delays in the ramp-up of a number of projects on which Worley was contracted to work.

Management has implemented an aggressive cost-cutting program, with benefits to be realized with fiscal 2014 second-half results. We’ll get a look at progress on this front when Worley presents second-half and full fiscal 2014 financial and operating numbers on Aug. 27, 2014.

At the same time, the company continues to see strong results from its operations in the US, Southern Africa and Europe.

So why are we recommending Worley again as a “best buy” for new money following recommendations in February 2012, when we added it to the Aggressive Holdings, and in February 2013, at a time when its operating and financial performance was on the wane, and why now?

The short answer is that Worley has a clear path to medium-term earnings growth, supported by management’s cost-cutting program as well as momentum from recent contract awards. The balance sheet is strong, with low overall debt and total maturities coming due before Dec. 31, 2016, representing just 0.5 percent of its current market capitalization.

Expectations among analysts have also been tempered, so it’ll be easier to turn out upside surprises after the series of profit downgrades.

Read-through from other energy and mining engineering services firms such as Fluor Corp (NYSE: FLR), KBR Inc (NYSE: KBR) and SNC-Lavalin Group Inc (TSX: SNC, OTC: SNCAF) suggests that the slower pace of growth in the global hydrocarbons sector and increased levels of project definition/design works over project execution works will continue.

This will drive growth in the near term for front-end engineering and design (FEED) work, which for Worley is a lower-margin operation than engineering, procurement and construction management services (EPCM) work.

Worley will also probably see an uptick in lower margin, higher risk work relative to its historical operating profile, including reimbursable engineering, procurement and construction (EPC) and “Improve” work, though the expansion of its service offering is allowing the company to target a wider set of projects.

But all of Fluor, KBR and SNC were upbeat on the medium term outlook for the global hydrocarbons, noting a coming pick-up in contract awards.

Fluor CEO David Seaton was particularly positive, noting, “We are very encouraged by the robust slate of major oil, gas and petrochemical prospects globally.” Mr. Seaton forecast that this cycle “will be larger than the last cycle.”

Fluor management was very positive about “a robust list of sizeable prospects in the United States, Canada, Mexico, Middle East and Asia.”

Worley stock is trading at 15.24 times fiscal 2014 first-half EPS and 15.96 times forecast full-year EPS. The price-to-book ratio is 1.92 times, and the enterprise value-to-earnings before interest, taxation, depreciation and amortization ratio is 10.15.

And, with a current dividend yield of 5 percent investors will be well compensated for the risk they’ll take on.

Near-term pressures on mining and hydrocarbon CAPEX are still significant. But medium- to long-term demand trends remain strong, particularly for oil and gas. And new energy supplies are increasingly derived from unconventional sources, and that adds to the cost and complexity of new projects and requires greater engineering expertise to extract.

WorleyParsons’ engineering base and long history of working on complex projects puts it in good position to win new work over time.

On July 28, 2014, management announced that Worley has been selected to provide brownfield engineering, procurement and construction management services (EPCM) contract the Woodside Petroleum Ltd (ASX: WPL, OTC: WOPEF, ADR: WOPEY)-operated AUD29.5 billion North West Shelf oil and gas project.

The NWS project, a joint venture among six major international companies, is one of the world’s largest liquefied natural gas (LNG) producers, supplying oil and gas to Australian and international markets from huge offshore gas and condensate fields in the Carnarvon Basin.

Worley will provide services for both onshore and offshore assets. Financial terms were undisclosed.

This award follows a June 12, 2014, award by global mining giant Vale SA (Brazil: VALE5, NYSE:  VALE) of a construction management support contract for the multi-billion dollar S11D project’s 90 million metric per annum iron ore processing facility in Brazil.

And on June 4, 2014, BG Group Plc (London: BG/, OTC: BRGXF, ADR: BRGYY) unit QGC picked Worley for an engineering and project services contract in support of the ongoing expansion of the USD20 billion Queensland Curtis LNG project, including the upstream coal-seam gas well heads, gathering pipelines, gathering compression and central compression facilities along with the midstream reception facilities, LNG process trains and tanker-loading facility.

Worley’s work includes the concept, front-end engineering and design (FEED), detailed engineering, procurement, construction management, project engineering, project management, operations and field support services.

In recent months Worley has also won LNG work in Canada, natural gas pipeline work from the Georgian-Turkish border to Turkey’s western border with Greece and LNG work in Trinidad and Tobago.

Cutting costs and winning contracts will help Worley meet near-term guidance and expectations. Over the long term its diversity of business operations–in terms of geography, industry sector and service offerings–is a fundamental strength. All three factors will drive medium- and long-term growth for revenue, earnings and dividends.

WorleyParsons trades on the ASX under the symbol WOR and on the US over-the-counter (OTC) market under the symbol WYGPF.  It also trades on the US OTC market as an American Depositary Receipt (ADR) under the symbol WYGPY. The ADR is worth one ordinary, ASX-listed share.

WorleyParsons is a buy on the ASX using the symbol WOR and on the US OTC market using the symbol WYGPF under USD17. WorleyParsons’ ADR is also a buy under USD17.

WorleyParsons’ fiscal year runs from Jul. 1 to Jun. 30. It reports full financial and operating results twice a year; it typically posts first-half results in mid- to late February, with full fiscal year numbers out in late August.

Interim dividends are usually declared in February along with first-half results. Final dividends are usually declared in August along with full fiscal-year results.

The most recent interim dividend of AUD0.34 per share was declared Feb. 26, 2014; it was paid Mar. 31, 2014, to shareholders of record as of March 7. Shares traded “ex-dividend” on this declaration as of March 3.

WorleyParsons will declare a final dividend on Aug. 27, 2014, when it reports full financial and operating results for fiscal 2014. It likely will be paid on or about Sept. 30, 2014, to shareholders of record as of approximately Sept. 5. Shares will likely go ex-dividend on or about Sept. 1.

Dividends paid by WorleyParsons are “qualified” for US tax purposes. Based on the “fiscal cliff” compromise reached in Washington, DC, in January 2013 dividends will be taxed at Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

The Australian government withholds 5 percent to 15 percent, based on the US-Australia tax treaty on double taxation. The two countries have not taken the step of eliminating withholding from dividends paid in respect of shares held in a US IRA, as have the US and Canada.

Among the 16 analysts who cover the stock six rate it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology, while nine rate the stock a “hold” and one says “sell.”

The “best consensus” 12-month target price among the analysts that provide such a number is AUD19.06, with a high of AUD20.84 and a low of AUD15.80.

Including an estimated annualized dividend rate of AUD0.77 per share, the 12-month total return based on WorleyParsons’ Aug. 14 closing price on the ASX of AUD17.27 and analysts’ consensus price target is 14.8 percent.