Jacobs Misses on Q1 Revs, Earnings


Jacobs Engineering Group Inc. (JEC) reported weak fiscal first-quarter 2014 (ended Dec 27, 2013) financial results. Both earnings and revenues fell short of the Zacks Consensus Estimate.

The company reported first-quarter earnings per share of 71 cents, 6.6% lower than year-ago earnings of 76 cents. The decline in earnings was primarily due to losses associated with the Sinclair Knight Merz acquisition. The quarterly earnings missed the Zacks Consensus Estimate of 73 cents by 2 cents. The earnings per share also included 5 cents gain related to settlement of a tax matter.

Excluding 10 cents of acquisition-related loss and 5 cents of gains related to resolved tax matter, adjusted earnings per share in the quarter was 76 cents.

Revenues: Revenues improved 11.2% year over year to $3.07 billion in the reported quarter, slightly lower than the Zacks Consensus Estimate of $3.09 billion. The Technical Professional Services component’s revenues came in at $1.67 billion, up from $1.61 billion in the year-ago quarter. The Field Services component’s revenues were $1.40 billion, up from $1.15 billion reported in the first quarter of fiscal 2013.

Costs/Margin: In the reported quarter, direct costs of contracts, a major expenditure for Jacobs, climbed 12.5% from the year-ago quarter and settled at $2.62 billion. Selling, general and administrative (SG&A) expenses came in at $308.6 million, up 12.0% year over year.

In the quarter, operating margin reached 4.7%, declining 108 basis points year over year.

Backlog: Exiting the quarter, backlog stood at $18.0 billion, rising 11.5% from $16.2 billion in the year-ago quarter. It includes backlog from the Technical Professional Services component of $12.3 billion versus $10.4 billion at the end of the first quarter of fiscal 2013, with the remainder coming from the Field Services component.

Balance Sheet: Jacobs’ cash and cash equivalents at the end of fiscal first-quarter 2014 were approximately $1.01 billion, down from $1.26 billion recorded at the end of the previous quarter. Total debt at quarter-end increased to $1.09 billion, compared with $437.9 million as of Sep 27, 2013. The increase in debt was mainly a result of debt raised to finance the acquisition of Sinclair Knight Merz, completed in the reported quarter.

Outlook: As per expectations, the first quarter of fiscal 2014 was weak. However, management predicts ample opportunities to increase market share as end markets promise significant improvement. For fiscal 2014, the company reaffirms its earnings per share expectations in the $3.35 to $3.90 range. 

Other Stocks to Consider

Jacobs currently carries a Zacks Rank #2 (Buy). Other stocks worth a watch in the industry include Fluor Corporation (FLR), Quanta Services, Inc. (PWR) and Beazer Homes USA Inc. (BZH). All these stocks carry the same Zacks Rank as Jacobs.

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