U.S. markets closed

Jacobs Wins Contract From Enfield to Support $7.75B Program

Zacks Equity Research

In a bid to deliver exceptional infrastructure in Upper Edmonton, Jacobs Engineering Group Inc. J has received a technical design and planning advisory services contract from Enfield Council.

Per the deal, Jacobs will offer multidisciplinary design and consultancy, including environmental, land quality and water catchment management services, at Meridian Water — a $7.75 billion, 20-year regeneration program in Upper Edmonton, which is located in the London Borough of Enfield, North London.

Also, in an effort to support integrated client/project team working and bring together a diverse range of datasets to enable testing of the master plan as it evolves in the coming years, Jacobs' People & Places Solutions (P&PS) will create a collaborative digital working environment.

In order to support Enfield Council and Meridian Water, Jacobs' team of planners, architects, designers and other specialists will associate with Avison Young, East, Knight Architects, Sound Diplomacy and Waugh Thistleton. Also, its partnership with Simetrica — a global leader in the field of social value measurement — will support Enfield's pursuit of inclusive growth opportunities.

Exceptional Project Execution Strategy to Support Growth

Jacobs’ P&PS business — which accounted for almost 65% of total revenues in first-quarter fiscal 2020 — serves clients of broad sectors like water, transportation, building and semiconductors.

On Mar 5, the company reported that the P&PS segment secured a framework contract from the Swedish Transport Administration (Trafikverket) to provide strategic consultancy services for the new high-speed railway lines planned between Stockholm, Gothenburg and Malmö in Sweden.

Efficient project execution has been primarily driving Jacobs’ performance over the last few quarters. The company’s ongoing contract wins are a testimony to the fact. Backlog at the end of first-quarter fiscal 2020 grew 11% from the year-ago period to $22.7 billion.

Long-Term Prospects & Impressive Fundamentals Bode Well

The P&PS segment has been a major growth driver of its revenues. Recently, the company reported strong results in the fiscal first quarter on the back of solid segmental performance, acquisitions and cost synergies.

Over the next three years (through 2021), management aims a 125-175 basis points (bps) expansion in adjusted operating margins. The company anticipates a 100-150 bps increase in Critical Mission Solutions or CMS margins and 110-140 bps growth in PPS margin, supported by the elimination of ECR.

It projects 3-5% net organic revenue growth, with P&PS leading the way with 4-6% top-line compound annual growth rate (CAGR) and CMS with 23% CAGR. The top-line growth is expected to be driven by recurring revenues that roughly occupy two-thirds of Jacobs’ total revenues, in turn reducing overall risks of market volatility.

Our Take

Jacobs’ shares have outperformed the industry so far this year. The outperformance is likely to continue in the near term, buoyed by strong backlog, inorganic moves, its transformed portfolio, and increased focus on infrastructure, aerospace, cybersecurity and technical building projects.



Although excessive contract pricing pressure, poor competency and extreme competition are concerns for the company, its contract winning spree and solid view are encouraging.

Zacks Rank

Jacobs — which shares space with AECOM ACM, KBR, Inc. KBR and Fluor Corporation FLR in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
AECOM (ACM) : Free Stock Analysis Report
 
KBR, Inc. (KBR) : Free Stock Analysis Report
 
Fluor Corporation (FLR) : Free Stock Analysis Report
 
Jacobs Engineering Group Inc. (J) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research