Jacobs Holds a Balanced Stance - Analyst Blog
April 12 2012 - 1:14PM
Zacks
We reiterate our Neutral recommendation on Jacobs
Engineering Group Inc. (JEC). While the company’s growing
international exposure is impressive, rising construction and labor
costs are the expected dampeners.
Global infrastructure development is riding high, with improved
highway transit, aviation, rail, waste water disposal and telecom
services. This provides room for Jacobs to diversify across
markets, geographies and services, accelerating growth and
expansion.
Jacobs continues with its contract winning streak from federal
and other clients, with acquisitions keeping up pace. In the recent
past, pricing per acquisition has also improved in favor of Jacobs,
wherein management sees potential for improving margins.
Based on the strategic mix shift toward higher-margin projects,
a steady backlog and better labor utilization strategy, Jacobs is
well positioned to take advantage of strong secular growth trends
relative to its competitors, such as Fluor
Corporation (FLR) and Foster Wheeler AG
(FWLT).
However, risks persist within the cyclical construction and
engineering industry wherein deteriorating economic conditions,
reduction in client spending or shift in loyalty adversely impact
business. Adding to the woe are the labor availability issues and
rising construction costs, which cannot be overlooked.
Jacobs is highly dependent on third-party equipment and
materials suppliers. In such a scenario, insufficient funding may
hamper suppliers’ business thus exposing Jacobs to delayed project
delivery, loss of goodwill or even order cancellation by
clients.
Jacobs reaffirmed its earnings guidance for fiscal year 2012
within a range of $2.80 to $3.20 per share based on a steady
backlog and improved growth prospects. The company maintains a
Zacks #3 Rank, which implies 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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