Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Here's Why Jacobs (J) Is a Buy Right Now

By Zacks Investment ResearchStock MarketsJun 23, 2021 03:11AM ET
www.investing.com/analysis/heres-why-jacobs-j-is-a-buy-right-now-200587882
Here's Why Jacobs (J) Is a Buy Right Now
By Zacks Investment Research   |  Jun 23, 2021 03:11AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Jacobs Engineering Group Inc (NYSE:J). J has been benefiting from improved segmental performances, solid backlog, acquisitions and efforts to focus on high-value business.

So far this year, shares of Jacobs have gained 22.3% compared with the Zacks Engineering - R and D Services industry’s 23.7% rally. Although the stock’s gains slightly lagged the industry’s rally, earnings estimates for the fiscal third quarter, fourth quarter and full-year fiscal 2021 have moved up 2.1%, 2% and 5.2%, respectively, over the past 60 days.

Also, Jacobs’ earnings surpassed the Zacks Consensus Estimate in 12 of the trailing 14 quarters This trend signifies bullish analyst sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Major Growth Drivers

Jacobs has an impressive earnings surprise history. The trend is expected to continue in the near term, courtesy of its solid first-half fiscal 2021 and fiscal 2020 results despite disruptions caused by the COVID-19 outbreak.

The company’s second-quarter fiscal 2021 revenues grew 3.5% and adjusted EBITDA increased 27% year over year. Net revenues (excluding pass-through revenues) also rose 6.7% year over year. Given the strong momentum, Jacobs lifted its adjusted EBITDA and EPS guidance during the fiscal second-quarter earnings call.

The company’s efficient project execution has been one of the main characteristics driving its performance over the past few quarters. The company’s ongoing contract wins are a testimony to the fact. During the fiscal second quarter, the company reported a backlog of $15.5 billion, up 9.6% year over year. This reflects consistent solid demand for Jacobs' consulting services.

Critical Mission Solutions (CMS) backlog grew 7% year over year and 6% on a pro-forma basis to $9.8 billion for the fiscal second quarter, which provided a strong visibility into the base business. People & Places Solutions (P&PS) backlog rose 9.6% year over year for the fiscal second quarter to $15.5 billion. The P&PS segment’s overall sales pipeline has expanded as both life sciences and electronics customers have moved forward with the previously paused projects.

During November 2020, Jacobs launched the Focus 2023 initiative, with expected benefits of more than $200 million versus fiscal 2020. Through this initiative, the company has been accelerating the adoption of digital technology across all facets of operations. This move will include a reduction in physical real estate footprint by more than 30% as it significantly shifts to a more flexible and virtual workforce.

Focus 2023 integration/transformation is expected to lead to $110 million of associated cash outflows in fiscal 2021. Also, this is expected to drive double-digit adjusted EBITDA growth in fiscal 2022. It can be said that several initiatives like this and the global need for infrastructural development have been a boon for Jacobs and companies like AECOM ACM, KBR (NYSE:KBR), Inc. KBR and Fluor Corporation (NYSE:FLR) FLR in the same industry.

Jacobs is reinforcing its business on the back of meaningful acquisitions and divestitures. In sync with this, on Mar 2, Jacobs acquired a 65% interest in PA Consulting — a U.K.-based leading innovation and transformation consulting firm — for $1.7 billion. The remaining 35% interest is held by PA Consulting employees.

PA Consulting will be treated as a consolidated subsidiary and a separate operating segment under U.S. GAAP accounting rules. It continues to expect 32-34 cents of adjusted EPS accretion from PA Consulting in fiscal 2021. In November 2020, Jacobs acquired a leader in advanced cyber and intelligence solutions -- The Buffalo Group. This strengthened its leading portfolio of national priority mission-focused, government solutions in the cyber domain and Intelligence Community.

In March 2020, a unit of Jacobs completed the acquisition of a nuclear consulting, remediation and program management business of John Wood Group, a U.K.-based energy services company. In fiscal 2019, Jacobs acquired KeyW, thereby enhancing the higher-margin CMS business through intelligence solutions capabilities in high-security clearance areas.

Furthermore, Jacobs’ superior return on equity (ROE) is indicative of its growth potential. The company’s ROE currently stands at 13.08%. This compares favorably with ROE of 6.3% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and ability to generate profit with minimum capital usage.

Zacks Investment Research
Zacks Investment Research
Image Source: Zacks Investment Research

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Fluor Corporation (FLR): Free Stock Analysis Report

AECOM (ACM): Free Stock Analysis Report

KBR, Inc. (KBR): Free Stock Analysis Report

Jacobs Engineering Group Inc. (J): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research
Here's Why Jacobs (J) Is a Buy Right Now
 

Related Articles

Here's Why Jacobs (J) Is a Buy Right Now

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email