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Jacobs (J) to Report Q3 Earnings: What's in the Offing?

Zacks Equity Research

Jacobs Engineering Group Inc. J is slated to report third-quarter fiscal 2020 results on Aug 3, before the opening bell.

In the last reported quarter, the company’s earnings and revenues beat the respective Zacks Consensus Estimate by 10.3% and 9.9%. On a year-over-year basis, earnings and revenues of this leading provider of professional, technical and construction services grew 16.8% and 10.9%, respectively.

Notably, Weyerhaeuser’s earnings topped the consensus mark in three of the last four quarters, with the average surprise being 9.5%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at 99 cents over the past 30 days. The estimated figure indicates a 29.3% decrease from $1.40 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $3.14 billion, suggesting a 0.8% decrease from the year-ago reported figure of $3.17 billion.

Jacobs Engineering Group Inc. Price and EPS Surprise

Jacobs Engineering Group Inc. Price and EPS Surprise
Jacobs Engineering Group Inc. Price and EPS Surprise

Jacobs Engineering Group Inc. price-eps-surprise | Jacobs Engineering Group Inc. Quote

Factors to Note

Jacobs’ fiscal third-quarter earnings and revenues are expected to have been hit by disruptions caused by the coronavirus outbreak. As highlighted during the fiscal second-quarter earnings call, management expects a temporary disruption from social distancing to nuclear remediation, DoD range operations and commercial businesses, along with project delays and lower infrastructural spending to impact its fiscal third-quarter performance. Importantly, Jacobs expects the majority of the headwinds to hurt fiscal third-quarter EBITDA as well.

Nonetheless, its strategic focus on transforming itself from an engineering and construction to a global technology-forward solutions company is expected to reflect on fiscal third-quarter results. Also, higher-margin backlog, focus on generating efficiencies through digital and technological solutions, along with solid project execution are expected to have boosted its growth. Yet, higher unallocated corporate expense, transaction, restructuring-related costs, as well as other incremental expenses are expected to have put pressure on margins.

Segment-wise, Jacobs’s People & Places Solutions or P&PS segment (comprising 65% of total revenues) is expected to have witnessed delays, and experienced a pressure on public budgets and small local and state municipalities.

The Zacks Consensus Estimate for the P&PS segment’s revenues is pegged at $1,812 million, indicating a 17% decrease from the fiscal second quarter. The same for backlog indicates a decline of 2.2% sequentially.

The Critical Mission Solutions or CMS segment (comprising 35% of total revenues) is expected to have been hit the most by physical distancing requirements. Normally stable and recurring enterprise contracts (like DoE remediation and DoD test ranges) have been experiencing limited access to client sites. This is expected to have been partly offset by persistently strong performance of the Cyber and Mission-IT business.

The consensus mark for CMS revenues is $1,236 million, suggesting a decline of 0.6% from the last reported quarter. The same for backlog is pegged at $9,317 million, implying a 2% improvement sequentially.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Jacobs this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 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 #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

TopBuild Corp. BLD has an Earnings ESP of +29.11% and holds a Zacks Rank #1.

Foundation Building Materials, Inc. FBM has an Earnings ESP of +28.57% and carries a Zacks Rank #3.

KBR, Inc. KBR has an Earnings ESP of +11.11% and carries a Zacks Rank #3.

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