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Jacobs to Support FEMA's Post-Disaster Recovery Program

Zacks Equity Research

Jacobs Engineering Group Inc. JEC has won an indefinite delivery/indefinite quantity (“IDIQ”) contract from Federal Emergency Management Agency (“FEMA”) to provide post-disaster support and assistance across the world.

The Public Assistance Technical Assistance Contract IV (“PA TAC IV”), which has an estimated ceiling value of $610 million, includes a one-year base period and four single-year options.

Per the deal, Jacobs, in conjunction with joint venture partner CDM Smith, will support Homeland Security's FEMA mission with engineering, architectural, financial and management-related services. The company will provide disaster operations in FEMA Region II, Region VII, Region IX and Region X across 17 U.S. states and territories.

FEMA provides supplementary federal disaster grant assistance via the PA TAC IV program to protect, repair and rebuild disaster-damaged publicly owned and certain private nonprofit organizations’ facilities. Also, it aids in developing hazard mitigation measures during the recovery process.

Prior to the latest IDIQ contract, Jacobs supported FEMA’s PA TAC III program via a contract worth more than $500 million. Through the contract, the company provided construction, management and technical services, including recovery support to Puerto Rico, after it was affected by Hurricane Maria.

The company’s Global Environmental Solutions ("GES") business has been supporting FEMA Logistics Housing Operations Unit Installation, Maintenance and Deactivation “(LOGHOUSE”) and Individual Assistance Services contracts. Within the LOGHOUSE contract, Jacobs is providing temporary housing installation and maintenance-related services, along with complete assistance to the families displaced by Hurricane Michael in the Florida panhandle.

Recently, the company realigned its business segments by shifting the GES business from the Aerospace, Technology and Nuclear (“ATN”) segment to the Buildings, Infrastructure and Advanced Facilities (“BIAF”) segment.

Notably, both the reportable segments have been driving the company’s overall performance over the last few quarters. This is evident from its fiscal first-quarter 2019 backlog. Backlog (excluding discontinued business ECR) grew 8% year over year to $20.3 billion in the said period. Higher-margin ATN and BIAF line of businesses continue to see a robust pipeline of government and infrastructure-spending programs.

The BIAF business (contributing 66.4% to fiscal first-quarter revenues) reported revenues of $2,048.8 million, which increased an impressive 90.9% year over year. Backlog in the segment also increased 7.4% from the prior-year quarter to $13.2 billion.

Also, its ATN segment, accounting for 33.6% of the total revenues, surged 45.6% in the fiscal first quarter. Moreover, backlog at the end of the quarter grew 7.8% year over year.

The company anticipates adjusted EPS in fiscal 2019 within $4.40-$4.80 and the same to be more than $5.00 in fiscal 2020. Moreover, the company projects three-year net organic revenues to witness a 3-5% CAGR, with BIAF leading the way with 4-6% top-line CAGR and ATEN with 2-3% CAGR.

Share Price Performance

Jacobs’ shares have outperformed its industry over the past year. The company’s shares have gained 27.3% compared with 2.5% growth of its industry in the said period. Its price performance is backed by an impressive earnings surprise history, having surpassed the Zacks Consensus Estimate in six of the trailing seven quarters.

Zacks Rank & Stocks to Consider

Currently, Jacobs carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the Zacks Construction sector include Apergy Corporation APY, Quanta Services, Inc. PWR and AECOM ACM. While Apergy and Quanta Services sport a Zacks Rank #1 (Strong Buy), AECOM carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apergy, Quanta Services and AECOM’s earnings for the current year are expected to increase 2.8%, 25.3% and 2.6%, respectively.

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