We issued an updated research report on
Jacobs Engineering Group Inc.
) on May 7, 2014. The company reported improved year-over-year
results for the second quarter of 2014 (ended Mar 28, 2014).
Adjusted earnings per share increased marginally to 82 cents from
80 cents in the year-ago quarter while revenues recorded a 12%
year-over-year hike to roughly $3.18 billion. The enhanced results
were primarily due to contribution from acquisitions.
Jacobs has been actively pursuing acquisitions in order to
expand its businesses. A strong balance sheet with significant cash
position helps it to reach the target. Recently, the company has
inked an agreement to acquire Federal Network Systems for an
undisclosed value. The acquisition is expected to consummate in the
summer of 2014. The company has also acquired many other companies
including Eagleton Engineering and FMHC Corporation. These
acquisitions are expected to boost the company's earnings, going
Jacobs has been extending its contracts pipeline, resulting in
healthy organic growth. In the recent past, the company won
contracts in different parts of the world. Jacobs has expertise in
several sectors including oil and gas, petrochemical, mining, IT
services and power.
Another important factor about the company is its strong
relationship-based model, which leads to repeat business. On an
average, around 65% of its business is obtained through long-term
relationship with customers. This is reflected in the repeat
business of about 96% conducted in the fiscal second quarter of
However, in the reported quarter, the company was negatively
impacted by several project related issues in Europe. This led to a
downward revision of the estimates for the whole year. The company
presently anticipates earnings per share to be in the range of
$3.15-$3.55 as against $3.35-$3.90 range expected
Moreover, Jacobs' overseas operations expose it to foreign
currency fluctuation risks. Also, the company's dependence on a
handful of suppliers is likely to hamper revenues in the occasion
of any one of them facing trouble.
With a market capitalization of $7.4 billion, Jacobs currently
holds a Zacks Rank #4 (Sell). Some better-ranked stocks worth
considering in the industry include
Pernix Group Inc
Willdan Group, Inc.
Toll Brothers Inc.
). While Pernix Group and Willdan Group sport a Zacks Rank #1
(Strong Buy), Toll Brothers holds a Zacks Rank #2 (Buy).
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