Jacobs Upholds Winning Legacy - Analyst Blog
March 01 2012 - 12:10PM
Zacks
Contract wins and project awards have always reinforced
positional advantages for the engineering and construction
professionals like Jacobs Engineering Group Inc.
(JEC), in a global infrastructure platform. Continuous inflow of
contracts as well as the alliance/acquisition strategies continued
to prove beneficial for the top-line results of these ventures,
including that of Jacobs.
The recent Design Supplier Contract Alliance with Sellafield and
strategic EPCM service contract from the Chinese Chemical group,
may be foreseen as an added benefit targeted to sustain the legacy
of win-win advantage for both Jacobs and its clients, going
forward.
Let us elaborate the contracts and their scope of work in the
following segments:
The Sellafield Award
Jacobs recently announced that its joint venture with AMEC,
Assystem and Mott MacDonald (AXIOM) has been awarded a contract
that will establish a design services alliance (DSA) with
Sellafield Limited for its operation in West Cumbria, United
Kingdom.
The alliance will be providing Sellafield with access to a full
range of multi-disciplined engineering services – civil and
structural, mechanical, control and instrumentation and process –
for the development and refurbishment of the new and existing
facilities and decommissioning at the Sellafield site. The contract
term has been estimated to operate for up to 15 years. Value of the
contract has not been disclosed yet.
According to the contract, AXIOM will be providing front-end
engineering design support for all new facilities as well as
refurbishment and upgrading of existing facilities and systems to
the production operations and infrastructure directorates at
Sellafield. This work is being delivered by the integrated team
involving local suppliers in collaboration with Sellafield's staff
leading to an effective supply chain.
Solvay Industrial Site
In another story, Jacobs announced winning of a contract from
‘Solvay’ for a major specialty polymers production plant to be
built at Solvay's industrial site in Changshu, located in the
province of Jiangsu, China.
Headquartered in Brussels, Solvay is an international chemical
group offering a broad range of products that improve the quality
of life and performance of its customers in markets such as
consumer goods, construction, automotive, energy, water and
environment, and electronics. Solvay has planned to invest
approximately $160 million into the specialty polymers production
plant, targeted to produce SOLEF® PVDF, TECNOFLON® FKM, and its
essential VF2 monomer.
Jacobs will be executing the engineering, procurement and
construction management (EPCM) services contract from its Shanghai
operations in China. The plant, scheduled to be operational in the
first quarter of 2014, is expected to significantly boost Solvay's
global production capacity for these specialty polymers. The
contract value is estimated to be approximately US$9 million.
About Jacobs
Jacobs Engineering Group, one of the world's largest and most
diverse providers of technical, professional, and construction
services, serves a variety of industrial, commercial and government
clients across a global network.
The company’s growing international exposure and diversification
across markets, geographies and services have given it a
competitive edge over its peers, such as Fluor
Corporation (FLR) and Foster Wheeler AG
(FWLT).
Our Take
We believe that the company’s long-term relationships with its
core clientele, on-time project execution as well asfocus on
smaller capital projects for streamlining thecapital budget will
generate satisfactory results in the coming quarters. The
company’s strategic contract wins and acquisitions across
geographies and services look promising, as well. Further, we
anticipate the company’s steady backlog and better labor
utilization to accelerate growth and multiple expansions, even
under the threat of a competitive infrastructure environment and
government spending cuts.
We currently hold a Neutral recommendation on the stock. Jacobs
has a Zacks #3 Rank, implying a short-term (1-3 months) Hold
rating.
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
FOSTER WHELR AG (FWLT): Free Stock Analysis Report
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
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