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Jacobs Wins $100M Follow-On Contract, Fortifies CMS Unit

Jacobs Engineering Group Inc. J has received a $100-million Research Laboratory Support (RLS) contract from the Environmental Protection Agency (EPA) to support the latter’s mission to protect human and environmental health.
 
Notably, this follow-on contract went into effect from Apr 1 and has a more than five-year base period. Per this deal, Jacobs will continue to provide technical, analytical, research and development, and logistical technology support to EPA Office of Research and Development, located at Research Triangle Park, NC.

Additionally, it will provide support in sync with the agency's research priorities, including decontamination and repercussion management of hazardous contaminations of buildings and outdoor areas; atmospheric sciences and human exposure; air quality simulation modeling; and development and validation of measurement methods, source emission characterizations, as well as data collection and reporting requirements.

Jacobs’ Critical Mission Solutions or CMS business will support the agency's research priorities, including decontamination and repercussion management of hazardous contaminations of buildings and outdoor areas; atmospheric sciences and human exposure; air quality simulation modeling; and development and validation of measurement methods, source emission characterizations, as well as data collection and reporting requirements.

In the past five years, Jacobs has been supporting EPA to deliver sustainable solutions in response to frequently changing environments. Notably, the EPS’s vital mission is essential to provide clean air and water as well as to identify, mitigate and remediate environmental threats across the world.

Solid Project Execution to Support Long-Term Prospects

Jacobs registered stellar growth in first-half fiscal 2020, driven by healthy segmental businesses, acquisitions, cost savings and a prudent project execution strategy. Overall, the company has a robust pipeline of opportunities across all businesses, as it has started to realize synergies from CH2M and KeyW buyouts.

Solid project execution has been one of the main characteristics driving its performance over the last few quarters. The company ended fiscal second quarter with a backlog of $23.3 billion, which reflects an increase of 12.5% year over year (up 5% on a pro-forma basis).

The CMS unit, contributing 36.3% to total revenues, serves global automotive, aerospace, telecommunications, defense, and nuclear clients as well as the U.S. intelligence community. During the fiscal second quarter, its CMS business registered backlog of $9.1 billion, up 5% year over year on a pro-forma basis.

Although the current market scenario remains unpredictable owing to COVID-19, the company’s long-term outlook for the business remains intact. It is projecting 3-5% net organic revenue growth through 2021. The top-line growth is expected to be driven by recurring revenues that roughly occupy two-thirds of Jacobs’ total revenues. This will enable the company to reduce overall risks of market volatility. Also, it aims a 125-175 basis-point expansion in adjusted operating margins in the long run. The margin expansion is expected to be driven by a combination of higher-margin backlog, and focus on generating efficiencies through digital and technological solutions.



So far this year, the company’s shares have outperformed the industry. The recent contract win will further add to its bliss.

Zacks Rank

Jacobs — which shares space with Gates Industrial Corporation plc GTES, Quanta Services, Inc. PWR and AECOM ACM in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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