Jacobs (JEC) To Report Q2 Earnings: What's In The Offing?

Jacobs Engineering Group Inc. (NYSE:JEC) is scheduled to report second-quarter fiscal 2018 (ended March 2018) results on May 8, before the market opens.

The company pulled off an average positive earnings surprise of 11.40% over the last four quarters. Notably, Jacobs’ fiscal first-quarter 2018 adjusted earnings of 77 cents per share surpassed the Zacks Consensus Estimate of 67 cents.

Our proven model shows that the company will likely beat estimates in the quarter under review.

Why a Likely Positive Surprise?

Jacobs has the right combination of the two key ingredients.

Zacks ESP: Jacobs currently has an Earnings ESP of +0.34%. This is because the stock’s Zacks Consensus Estimate of 88 cents is a penny lower than the Most Accurate estimate.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Jacobs’ favorable Zacks Rank #2 (Buy), when combined with a positive Earnings ESP, predicts a likely earnings beat.

Per our proven model, a stock needs to have a combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy) or 2 or at least 3 (Hold), for a likely earnings beat.

However, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving the Stellar Earnings?

Elevated infrastructure spending in the United States and some major emerging economies, like China, is expected to spur demand for Jacobs’ premium engineering and construction management services over the long run.

Though no specific financial guidance has been provided for the fiscal second quarter, Jacobs’ expectation for the fiscal will give a rough idea of the factors that might have influenced results in the to-be-reported quarter.

The company expects that elevated defense spending in major economies like the United States, new organic investments, bolt-on acquisitions, superior customer relationships and sturdier demand for state-of-the-art technology solutions will boost revenues of Aerospace & Technology line of business (LOB).

Additionally, increasing public investments in worldwide transportation and water infrastructure, as well as business prospects in the healthcare market are anticipated to drive top-line performance of the company’s Buildings & Infrastructure LOB in the near term.

Moreover, the company believes revenues of its Industrial LOB will go up in the upcoming quarters, on the back of improved life science, semiconductor, and mining & minerals businesses.

Furthermore, amid the lackluster energy market, Jacobs expects that efforts to strengthen its downstream chemicals and refining business will likely drive revenues of the company's Petroleum & Chemicals LOB.

Stellar top-line performance of the aforementioned segments, greater cost management, restructuring moves, reduced corporate taxes and timely project delivery are expected to have reinforced the company’s bottom-line performance in the quarter.

Other Stocks to Consider

Here are some stocks in the Zacks Construction sector that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Fluor Corporation (NYSE:FLR) carries a Zacks Rank #2 and has an Earnings ESP of +0.63%. You can see the complete list of today’s Zacks #1 Rank stocks here.

M.D.C. Holdings, Inc. (NYSE:MDC) carries a Zacks Rank of 2 and has an Earnings ESP of +9.98%.

United Rentals, Inc. (NYSE:URI) also holds a Zacks Rank of 2 and has an Earnings ESP of +0.28%.

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