Why Is Jacobs Solutions (J) Down 0.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Jacobs Solutions (J). Shares have lost about 0.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Jacobs Solutions due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Jacobs Q1 Earnings & Revenues Top Estimates
Jacobs Engineering Group Inc. reported first-quarter fiscal 2023 (ended Dec 30, 2022) results, with earnings and revenues surpassing their respective Zacks Consensus Estimate and rising year over year. The results reflect the company’s ability to capture high growth opportunities emerging across Climate Response, Data Solutions and Consulting & Advisory.
Looking into fiscal 2023 and beyond, Jacobs' president and CFO Kevin Berryman added, "We delivered solid first quarter results with double-digit revenue growth, strong profitability performance and robust cash flow generation. The profitability mix within our revenue backlog improved in Q1, which positions us well to achieve our fiscal year 2023 outlook. We continue to expect strong demand across our diverse portfolio of solutions with the ability to drive further earnings per share growth by prudently deploying capital."
Earnings & Revenue Discussion
For the reported quarter, adjusted earnings of $1.67 per share topped the consensus estimate of $1.61. Also, the reported figure was up 7% from the year-ago period.
Jacobs’ revenues totaled $3.8 billion, topped the consensus mark of $3.62 billion and grew 12.4% year over year. Revenues were up 7.7% year over year in constant currency.
Backlog at the end of first-quarter fiscal 2023 amounted to $28.3 billion, up 1% from a year ago.
Segment Details
Revenues from the Critical Mission Solutions or CMS segment of $1.08 billion increased 10.1% year over year. Yet, the segment operating profit of $82.2 million was down from $91.2 million reported a year ago. The backlog at the fiscal first-quarter end was $7.63 billion, slightly up from $7.53 billion a year ago.
Revenues from the People & Places Solutions or P&PS segment totaled $2.23 billion, which inched up 15.8% year over year. Net revenues (excluding Pass Through Revenue) were up 8.2% year over year. Segment operating profit grew 20% from the prior-year quarter to $226.6 million. The backlog at the quarter end was $17.2 billion, up from $16.93 billion a year ago.
Revenues from the Divergent Solutions segment totaled $214.5 million, which grew 11.2% year over year. Divergent Solutions net revenues were up 3% year over year. Segment operating profit declined 48.2% from the prior-year quarter to $12 million. The backlog at the quarter-end was $3.08 billion, down from $3.28 billion a year ago.
PA Consulting generated $282 million in revenues in the fiscal first quarter, down from the year-ago quarter’s figure of $290 million. Segment operating profit was $51 million, down from $63.1 million a year ago. Quarter-end backlog amounted to $306 million, up from $276 million a year ago.
Margins Profile
Total segment operating profit grew to $371.8 million from $366.3 million a year ago.
Balance Sheet & Cash Flow
At the fiscal first-quarter end, Jacobs had cash and cash equivalents of $1,211.1 million, up from $1,140.5 million at the fiscal 2022-end (Sep 30, 2022). Long-term debt increased to $3.43 billion at the fiscal first-quarter end from $3.36 billion at the fiscal 2022-end.
Net cash provided by operating activities totaled $302.3 million in the quarter compared with $321.6 million in the year-ago quarter.
Fiscal 2023 Guidance Maintained
Meanwhile, based on recent FX rates, Jacobs still expects adjusted EBITDA between $1,400 million and $1,480 million and adjusted earnings within $7.20-$7.50 per share (up 6% both at the midpoints).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Jacobs Solutions has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 Solutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Jacobs Solutions is part of the Zacks Technology Services industry. Over the past month, Trane Technologies (TT), a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended December 2022 more than a month ago.
Trane Technologies reported revenues of $4.07 billion in the last reported quarter, representing a year-over-year change of +14.1%. EPS of $1.82 for the same period compares with $1.36 a year ago.
Trane Technologies is expected to post earnings of $1.33 per share for the current quarter, representing a year-over-year change of +18.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
Trane Technologies has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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