Jacobs Engineering Group Inc. (NYSE:JEC) reported better-than-expected results for the second quarter of fiscal 2018 (ended Mar 31, 2018). It delivered positive earnings surprise of 13.6% and surpassed sales estimates by 11.4%.
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.
Segmental Performance Drives Revenues
In the quarter under review, Jacobs’ 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.
The company reports its revenues in three segments — Aerospace, Technology, Environmental and Nuclear; Buildings, Infrastructure and Advanced Facilities; and Energy, Chemicals and Resources. The segmental information is briefly discussed below:
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.
Margin Profile Mixed
In the quarter under review, Jacobs’ 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 and Cash Flow
Exiting the second quarter of fiscal 2018, Jacobs’ 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 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, and Buildings, Infrastructure and Advanced Facilities, 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.
Jacobs Engineering Group Inc. Price, Consensus and EPS Surprise
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