Why Is Jacobs Engineering (JEC) Up 6.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Jacobs Engineering (JEC). Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Jacobs Engineering due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Jacobs (JEC) Q3 Earnings & Revenues Beat Estimates, View Up

Jacobs Engineering Group Inc. reported better-than-expected results in third-quarter fiscal 2019 (ended Jun 28, 2019). Notably, the company lifted its earnings and adjusted EBITDA guidance for fiscal 2019, given continuous innovation, solid project execution and diversification into new high-margin growth opportunities.

The company reported adjusted earnings per share (EPS) of $1.40, surpassing the Zacks Consensus Estimate of $1.25 by 12% and increase of 12.9% year over year. The upsurge was driven by accelerated CH2M cost savings and prudent strategy execution.

Segmental Performance Drives Revenues

During the reported quarter, Jacobs’ revenues came in at $3.17 billion, surpassing the consensus mark of $3.15 billion by 0.7% and increasing 8% from a year ago period. The improvement was driven by healthy segmental businesses and the KeyW acquisition. Backlog as of Jun 28, 2019 totaled $22.5 billion, up 8% from $19.8 billion reported in the comparable year-ago period.

Segment Details

Jacobs reports revenues under two segments — Aerospace, Technology and Nuclear (ATN); and Buildings, Infrastructure and Advanced Facilities (BIAF).

Revenues from the Aerospace, Technology and Nuclear segment of $1,156.5 million (representing 36.5% of total revenues) increased 13.2% year over year. Backlog at the end of the quarter was roughly $8.5 billion, up 18.3% year over year.

Revenues from the Buildings, Infrastructure and Advanced Facilities segment totaled $2,013.1 million, increasing 5.3% year over year and accounting for 63.5% of revenues in the quarter under review. Backlog at the end of the quarter was roughly $14 billion, up 10.4% year over year.

Margins Profile

In the quarter under review, adjusted gross profit increased 2.9% year over year to $628.6 million. Adjusted selling, general and administrative expenses — which grew 2% from the prior-year quarter to $395.8 million — represented 12.5% of its total revenues. Adjusted operating margin contracted 70 basis points to 8.8% in the quarter.

Balance Sheet and Cash Flow

At the end of the fiscal third quarter, Jacobs had cash and cash equivalents of $998.2 million, up from $634.9 million at fiscal 2018-end. Long-term debt balance decreased to $1.25 billion at the end of the quarter from $2.14 billion at fiscal 2018-end.

In the fiscal third quarter, the company used cash in operating activities of $165.1 million compared with cash provided by operations of $214.7 million a year ago.

2019 View Up

Jacobs now expects fiscal 2019 pro-forma EPS in the range of $4.75-$5.00, up from prior expectation of $4.45-$4.85. Jacobs also increased the lower end of its adjusted EBITDA guided range to $0.965-$1 billion from $0.92-$1 billion expected earlier.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Jacobs Engineering has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jacobs Engineering has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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