It has been about a month since the last earnings report for Jacobs Engineering Group Inc. JEC . Shares have added about 6.9% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is JEC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Jacobs Engineering reported better-than-expected results for the second quarter of fiscal 2018 (ended Mar 31, 2018). Earnings/Revenues
The company's adjusted earnings in the reported quarter were $1.00 per share, surpassing the Zacks Consensus Estimate of 88 cents. Also, the bottom line increased 28.2% from the year-ago tally of 78 cents.
In the quarter under review, Jacobs Engineering's revenues totaled $3,935 million, reflecting growth of 69.7% from the year-ago quarter. The improvement was driven by healthy segmental businesses. Also, the top line outpaced the Zacks Consensus Estimate of $3,532 million.
Backlog at the end of the quarter was $26.5 billion, increasing 43.8% year over year. Segment Details
Revenues from Aerospace, Technology, Environmental and Nuclear segment were $1,105.7 million, increasing 83.7% year over year. It represented 28.1% of the reported quarter's revenues. Backlog at the end of the quarter was roughly $8.8 billion, up 57.3% year over year.
Revenues from Buildings, Infrastructure and Advanced Facilities segment totaled $1,758.4 million, increasing 95.9% year over year. It represented 44.7% of the reported quarter's revenues. Backlog at the end of the quarter was roughly $10.9 billion, up 67.6% year over year.
Revenues from Energy, Chemicals and Resources segment totaled $1,070.9 million, increasing 33.4% year over year. It represented 27.2% of the reported quarter's revenues. Backlog at the end of the quarter was roughly $6.9 billion, up 7.9% year over year. Costs/Margin
In the quarter under review, Jacobs Engineering's cost of sales surged 68.3% year over year to $3,161.7 million. It represented 80.3% of revenues compared with 81% in the year-ago quarter. Gross margin increased 70 basis points (bps) year over year to 19.7%. Selling, general and administrative expenses flared up 84.4% year over year to $553.3 million. It represented 14.1% of revenues.
Adjusted operating income in the quarter under review increased 56.7% year over year to $220 million. However, adjusted operating margin shrunk 50 bps to 5.6%. Balance Sheet
Exiting the second quarter of fiscal 2018, Jacobs Engineering's cash and cash equivalents were $835.4 million, roughly 21.2% below $1,059.8 million at the end of previous quarter. Long-term debt balance decreased 2.9% sequentially to $2,511.8 million.
Capital expenditure in the quarter under review totaled $44.8 million, below $45.8 million in the year-ago quarter. Outlook
For fiscal 2018, Jacobs Engineering anticipates benefiting from the CH2M buyout, having progressed well toward integrating these assets. Cost synergies of $150 million will be achieved by the end of fiscal 2019. Also, healthy segmental business, especially of Aerospace, Technology, Environmental and Nuclear as well as Buildings, Infrastructure and Advanced Facilities segments, will be advantageous. Reduction of debts will be a priority in the second half of fiscal 2018.
Based on the company's performance in the first half of fiscal 2018, it increased adjusted earnings per share projection to $4.00-$4.40 from the previous forecast of $3.85-$4.25.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.
Jacobs Engineering Group Inc. Price and Consensus
Jacobs Engineering Group Inc. Price and Consensus | Jacobs Engineering Group Inc. Quote
At this time, JEC has an average Growth Score of C, however its momentum is doing a bit better with a B. The stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise JEC has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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