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Jacobs Inks Contact for the Largest Shipyard in Arabian Gulf

Zacks Equity Research

Jacobs Engineering Group Inc. JEC has clinched a contract from SEPCO Electric Power Construction Corporation, a wholly-owned subsidiary of PowerChina, for the Maritime Industries and Services project at Ras Al Khair in the Kingdom of Saudi Arabia.

Per the contract, the company will provide engineering services for Packages 4, 5 and 6 of the King Salman International Complex for the project.

Spanning across 4.3 square kilometers, the shipyard complex will be the largest in the region upon completion. It will be capable of providing a combination of offshore structures fabrication, new ship building and maintenance, along with repair and overhaul services. Jacobs is entitled to deliver detailed design services to the project that comprises piers, dry-docks, ship lift, buildings, supporting infrastructure, utilities, telecommunications and security systems.

The King Salman International Complex for Maritime Industries and Services is part of Saudi Arabia’s National Industrial Strategy to focus on economic diversification. Courtesy of the project, which is owned by Saudi Aramco and its joint venture partners, Saudi Arabia will become a top shipbuilder globally.

This contract will enable Jacobs to leverage global engineering expertise on this project via Buildings, Infrastructure and Advanced Facilities (“BIAF”) business.

A Look at Jacobs’ BIAF Performance

BIAF business, accounting for 65.7% of total revenues, has been exhibiting stellar performance over the last few quarters. Revenues from the segment increased 4.4% year over year in the last reported quarter. Most importantly, the segment’s backlog at the end of the quarter was roughly $13.4 billion, up 11.1% year over year. The company, which shares space with AECOM ACM, Altair Engineering Inc. ALTR and KBR, Inc. KBR in the Zacks Engineering - R and D Services industry, expects overall net organic revenue growth to be 3-5% for the next three years (through 2021), with BIAF leading the way with top-line CAGR of 4-6%.

Shares of Jacobs, a Zacks Rank #3 (Hold) stock, have outperformed its industry year to date. The company’s shares have gained 40.8% compared with 23.2% growth of its industry in the said period. The price performance is backed by an impressive earnings surprise history. The company surpassed earnings estimates in seven of the trailing eight quarters. Efficient project execution has been driving Jacobs’ performance over the last few quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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