FWLT (MM)

On July 25, 2011, Jacobs Engineering Group Inc. (JEC) reported its financial results for the third quarter of 2011 with net earnings per diluted share of 71 cents in the quarter, up from 15 cents reported in the year-ago quarter. Results were marginally above the Zacks Consensus Estimate of 70 cents.

Total revenue inched up 9.4% year over year to $2,744.2 million, above the Zacks Consensus Estimate of $2,687.0 million.

Revenues from Technical Professional Services (58.1% of total revenue) increased to $1,593.5 million from $1,280.1 million in the third quarter of fiscal 2010 while revenues from Field Services (41.9% of total revenue) dropped 6.3% to $1,150.7 million.

In the third quarter, operating margin improved 330 basis points to 5.1% from 1.8% in the year-ago quarter. The performance was primarily attributable to controlled expenses in the quarter. Direct costs of contracts, a major expenditure for Jacobs, as a percentage of revenue, decreased to 85% from 89.1% in the prior-year quarter. However, selling, general and administrative (SG&A) expenses, as a percentage of revenue rose by 90 basis points to 10%.

At the end of the third quarter, backlog was approximately $14.0 billion, up from $13.5 billion at the end of the third quarter of 2010.

Jacobs’ cash and cash equivalents, exiting the third quarter, was approximately $773.8 million, down from $941.7 million year over year while total debt increased to $551.2 million from $94.1 million in the previous year quarter.

Outlook: Jacobs maintained its earnings guidance range for fiscal year 2011 to $2.40–$2.80 per share based on steady backlog and solid prospect list of contracts.

Jacobs Engineering Group Inc. is one of the world's largest engineering and construction companies providing services to a variety of industrial, commercial and government clients across a global network. The company directly competes with its peers, such as Fluor Corporation (FLR) and Foster Wheeler AG (FWLT).

We currently maintain a long-term Neutral recommendation on the stock. Jacobs has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).

 
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