Jacobs Engineering Group Inc. J has received a contract from National Aeronautics and Space Administration (NASA). Jacobs will continue providing architect-engineer environmental engineering services at Huntsville, AL-based Marshall Space Flight Center (“MSFC”), and other centers and installations.
Under this five-year, indefinite delivery/indefinite quantity contract, Jacobs’ People & Places Solutions will provide Environmental compliance, Environmental remediation and Regulatory risk analysis and communications services to MSFC.
Over the past 30 years, the company has been providing environmental services to MSFC. Out of 10 field centers, MSFC has been leading the Space Shuttle main propulsion and external tank; payloads and related crew training; International Space Station design and assembly; computers, networks, and information management; and the Space Launch System. Also, MSFC was recently selected to manage the Artemis program for NASA, which aims to put astronauts on the moon by 2024.
Under a separate NASA’s Engineering Services and Science Capability Augmentation contract, Jacobs is providing critical science and engineering and technical support for flagship programs at MSFC including the Space Launch System, the International Space Station, and numerous space science and technology development projects.
Jacobs’ Long-Term Prospects Look Solid
Jacobs’ PPS business (earlier known as Buildings, Infrastructure and Advanced Facilities) – which accounted for 64.3% of total fiscal 2019 revenues — serves clients of broad sectors like water, transportation, building and semiconductors. The segment has been a major growth driver for the company.
In the fiscal fourth quarter, the segment’s revenues increased 8.8% year over year. Also, backlog at the end of the quarter was up 10% from the year-ago period. The company’s solid project execution strategy and strategic focus on transitioning from engineering and construction to global technology-forward solutions bode well.
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.
The company is projecting 3-5% net organic revenue growth, with PPS leading the way with 4-6% top-line 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.
Impressive Fundamentals Drive Growth
Jacobs’ shares have rallied almost 56% in a year, outperforming its industry’s 27.2% growth. The price performance is backed by an impressive earnings surprise history, having surpassed estimates in eight of the trailing nine quarters. The outperformance is likely to continue in the near term as well, buoyed by strong backlog, inorganic moves, its transformed portfolio, and increased focus on infrastructure, aerospace, cybersecurity and technical building projects.
Although Jacobs and other players like AECOM ACM, KBR, Inc. KBR and Fluor Corporation FLR are witnessing excessive contract pricing pressure, poor competency and extreme competition, contract wins spree and solid views are encouraging.
Currently, Jacobs carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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