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Jacobs (JEC) Receives Dounreay Decommissioning Contract

Zacks Equity Research

Jacobs Engineering Group Inc. JEC has won a contract from Dounreay Site Restoration Limited (DSRL) to provide decommissioning services in one of the most complex nuclear decommissioning programs in Europe, namely Dounreay.

As part of the decommissioning services framework, which spans four years with potential extensions of up to three years, the company is responsible for the construction of a size reduction facility, shaft and silo decommissioning, as well as demolition of historic active laboratories. DSRL estimates the award to be worth up to $500 million.

Located in Caithness County, Scotland, the Dounreay site is currently Scotland's largest nuclear clean-up and demolition project. The redundant facilities require clean-up and demolition, involving innovative techniques and solutions, to achieve decommissioning in order to make the site safe and clean for future generations.

Jacobs, through Aerospace, Technology and Nuclear (“ATN”) — accounting for 34.3% of total second-quarter fiscal 2019 revenues — serves global automotive, aerospace, telecommunications, defense, and nuclear clients, as well as the intelligence community of the United States.

Efficient project execution has been one of the main factors driving Jacobs’ performance since the last few quarters. The company’s ongoing contract wins are a testimony to the fact. Backlog at the end of the fiscal second quarter increased 7.5% year over year to $20.7 billion. Moreover, ATN backlog increased 2% year over year to $7.3 billion in the quarter.

The company’s ATN business is executing well and is positioned to deliver double-digit increase in profits on a year-over-year basis in fiscal 2019. Its focus on mission-critical enterprise contracts over the long term bodes well. It has a robust pipeline of more than $30 billion through 2020. These positives are likely to continue driving Jacobs’ bottom line in the upcoming quarters.

Share Price Performance

Jacobs’ shares have outperformed its industry so far this year. The company’s shares have gained 29.7% compared with its industry’s collective rise of 14.5% in the said period. The company’s price performance is backed by an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in seven of the trailing eight quarters.

Zacks Rank & Stocks to Consider

Currently, Jacobs carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Construction sector include AECOM ACM, Quanta Services, Inc. PWR and Altair Engineering Inc. ALTR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AECOM has a solid earnings surprise history, having surpassed the consensus mark in all the trailing four quarters, with the average being 6.2%.

Quanta Services and Altair Engineering’s earnings for the current year are expected to increase 28.8% and 53.7%, respectively.

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