Jacobs (JEC) To Report Q4 Earnings: What's In The Cards?

Jacobs Engineering Group Inc. (NYSE:JEC) is scheduled to report fourth-quarter fiscal 2018 results on Nov 20, before the opening bell.

In the last reported quarter, the company’s earnings came in at $1.35 per share, beating the Zacks Consensus Estimate of $1.19 by 13.5%. In fact, Jacobs, which shares space in the Zacks Engineering - R and D Services industry with Fluor Corporation (NYSE:FLR) and Quanta Services, Inc. (NYSE:PWR) , surpassed estimates in all the trailing four quarters, resulting in average positive surprise of 15.4%.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. For the quarter to be reported, the Zacks Consensus Estimate is currently pegged at $1.21, remaining stable over the past 30 days. Nevertheless, this reflects an increase of 23.5% from the year-ago earnings of 98 cents per share. Revenues are expected to be $4.24 billion, up 59.6% year over year.

Factors at Play

The company has been experiencing improved profitability on the back of higher revenues, increased focus on high-value businesses, efficient project execution and CH2M acquisition. These positives are likely to continue driving Jacobs’ top as well as bottom lines in the to-be-reported quarter and beyond.

The company continues to benefit from robust end-market demand across its three segments, i.e., Aerospace, Technology, Environmental and Nuclear or ATEN line of business; Buildings, Infrastructure and Advanced Facilities business or BIAF; along with Energy Chemicals and Resources or ECR sector.

The company expects 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 to boost revenues of the Aerospace & Technology line of business. Overall, Jacob’s ATEN business is executing well and is positioned to deliver a double-digit year-over-year profit increase in fiscal 2018, with continued strong growth in 2019 as well. For the fiscal fourth quarter, the company expects double-digit growth in revenues on a year-over-year basis, as it continues to ramp the newly awarded contracts.

For the BIAF segment, the company expects margins to expand both on a sequential and year-over-year basis to the 8-9% range in the fourth quarter, backed by strong project delivery metrics and benefits from the scale of the combined businesses.

Meanwhile, the company expects ECR margins to continue to expand, as it focuses on lower-risk, higher-margin opportunities, as well as benefits from a recovery in the energy and commodity end markets.

Overall, stellar top-line performance of the aforementioned segments, along with prudent cost management and improved project execution are expected to have reinforced the company’s bottom-line performance in the to-be-reported quarter.

What Does the Zacks Model Say?

Our proven model does not conclusively show that Jacobs is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Jacobs currently carries a Zacks Rank #2.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stock Worth a Look

Here is a construction sector that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat in the upcoming release:

Toll Brothers Inc. (NYSE:TOL) has an Earnings ESP of +3.68% and a Zacks Rank #3. The company is slated to report quarterly results on Dec 5.

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