Jacobs Wins JV Sub-Contract For Major Transport Project

Jacobs Engineering Group Inc. (NYSE:JEC) has secured a position in a prominent South Australian transport project. The company is now part of a joint venture that has won a sub-contract from the Gateway South Consortium, for offering services in the Darlington Upgrade project in Adelaide, Australia. The new deal is likely to enhance Jacobs’ Buildings & Infrastructure business in the near term.

Gateway South Consortium is a joint venture between Laing O’Rourke and Fulton Hogan. This association has extended the sub-contract to another joint venture formed by Jacobs, SMEC Holdings Limited and KBR. Financial details of the sub-contract have not been disclosed.

As per the offer extended by Gateway South Consortium, Jacobs and its two venture partners will be offering construction and designing services in the Darlington Upgrade project. It is a vital transportation project in Australia, with a budget of roughly $400 million. This project intends to augment safety and reduce congestion and travel time in the region.

The sub-contract calls for the reconfiguration of the 3.3-kilometer road connecting the north of Tonsley Boulevard to Southern Expressway. Also, the companies will provide the design for a non-stop motorway beneath Mimosa Terrance, Flinders Driver, Sturt Road and Tonsley Boulevard. All legal formalities related to the prestigious project are expected to be accomplished by 2018.

Moving Forward

Share price of the company was $51.57 per share as of Sep 8, 2016. We expect the aforesaid announcement to boost investors’ confidence in the stock. Higher transportation investments incurred by the government authorities of Australia and U.K, the recently passed U.S. Highway Bill and strategic acquisition of J.L. Patterson & Associates in Dec 2015 are all expected to boost Jacobs’ Buildings & Infrastructure segment’s top line in the near term.

Zacks Rank

Jacobs currently carries a Zacks Rank #3 (Hold). The company remains on track to boost its financials via new contracts, improved backlogs, greater operational efficiency and increased innovations. However, headwinds like a strong U.S. dollar, robust industry competition and dismal pricing environment in the global mining and energy market raise concerns.

Stocks to Consider

Better-ranked stocks within the industry include Willdan Group, Inc. (NASDAQ:WLDN) , Boise Cascade Company (NYSE:BCC) and Caesarstone Ltd. (NASDAQ:CSTE) . All the three companies presently hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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