Jacobs on a Winning Spree - Analyst Blog

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Series of contract wins and project awards have always helped engineering and construction experts like Jacobs Engineering Group Inc. ( JEC ) to strengthen its position in the global infrastructure arena. Recently, the company announced receipt of two strategic contract awards; one from INEOS Enterprises Limited and the other from the U.S. Department of Veterans Affairs (VA).

As per the terms of the agreement with INEOS Enterprises, the company will be engaged in designing and installing two heat exchangers in a sulfuric acid plant section based in Runcorn, Cheshire in the United Kingdom. The plant will be featuring Jacobs' customized proprietary Chemetics® equipment and the equipment is likely to be assembled at Jacobs' operating unit based in Pickering, Ontario. The financial terms and conditions of the agreement have not been disclosed yet.  

In addition, according to the deal with U.S. Department of Veterans Affairs (VA), Jacobs will offer planning and engineering support services to six Veterans Integrated Service Networks (VISN) across the United States. The contract with a five-year tenure is an indefinite delivery/indefinite quantity (IDIQ) award and is likely to fetch order of approximately $45 million for the company.    

On the same day, the company also reported acquiring a major stake in DM Petroleum Operations Company (DM) based in New Orleans, Louisiana. Following the acquisition, both parties would be able to further diversify their services and drive greater growth in business. However, the terms of the transaction were unveiled.

Strategic contract wins, like the ones mentioned above, and acquisitions across geographies and services are all in the positive direction and contribute enormously to Jacob's growth prospects, fuelling revenue expansion in the coming quarters. Additionally, Jacobs' flexible cost structure and impressive track record of in-time project execution will help it retain its long-term relationships with its core customers.

The company provides stiff competition to other industry players including Fluor Corporation ( FLR ) and Foster Wheeler AG ( FWLT ).

The current Zacks Consensus Estimate for the second quarter is 75 cents, representing a year- over-year increase of 5.47%. Estimates for fiscal years 2012 and 2013 are $2.89 and $3.32, reflecting a year-over-year growth of 9.10% and 14.83%, respectively. We currently maintain a Neutral recommendation on Jacobs. The stock also bears a Zacks #4 Rank, which implies a short-term (1-3 months) Sell rating.


 
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
 
FOSTER WHELR AG (FWLT): Free Stock Analysis Report
 
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DM , FLR , FWLT , JEC , VISN

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