JEC Jacobs Engineering Group Inc

Jacobs Engineering Group Inc. (JEC) reported modest fiscal first-quarter 2013 (ending Dec 28, 2012) financial results. Though earnings came in line with the Zacks expectations, the quarter’s revenues fell short of the Zacks Consensus Estimate.

The company reported first quarter earnings per share of 76 cents, in line with the Zacks Consensus Estimate. The quarterly earnings improved 8.6% from the year-ago earnings of 70 cents a share, due to improvement in revenue as well as margins.

Revenue

Revenue increased 4.9% year over year to $2.6 billion in the reported quarter. However, it fell short of the Zacks Consensus Estimate of $2.8 billion by 2.4%. Technical Professional Services revenue came in at $1.6 billion, compared with $1.5 billion in the year-ago quarter. Field Services revenue in first quarter was $1.2 billion, compared with $1.1 billion in the first quarter of 2012.

Costs/Margin

During the reported quarter, direct costs of contracts, a major expenditure for Jacobs, edged up 5.1% from the year-ago quarter to settle at $2.3 billion. Selling, general and administrative (SG&A) expenses came in at $275.4 million, down 1.3% year over year.

Operating profit improved to $160.3 million, an increase of 12.9% over the year-ago quarter. Operating margin reached 5.8% compared wit 5.4% in the year-ago quarter.

Backlog

Exiting the quarter, backlog stood at $16.2 billion, an increase of 11.8% from $14.5 billion in the year-ago quarter. It includes backlog from technical professional services of $10.4 billion versus $9.5 billion at the end of the first quarter of 2012, with the remaining pouring in from Field Services.

The company has won a number of contracts in the quarter, including a contract to support Air Force Material Command (Oct 16, 2012, worth $27 million); another contract from NASA Stennis Space Centre in Mississippi to provide modification services (Oct 23, 2012, worth $15 million), yet another from NAVFAC Mid-Atlantic to provide engineering services (Nov 27, 2012, worth $30 million), among many others.

Balance Sheet

Jacobs’ cash and cash equivalents at the end of first quarter were approximately $1.2 billion, a whopping increase of 20.3% from the previous quarter. Total debt decreased 1.9% sequentially to $518.2 million as of Dec 28, 2012.

Outlook

Based on the modest results for the first quarter, Jacobs maintains its earnings expectation for fiscal 2013 to range between $3.00 and $3.50 per share, with the Zacks Consensus Estimate of $3.30. Management also sees ample opportunities to increase market share as end markets see significant improvement.

Jacobs is one of the world's largest and most diverse providers of technical, professional and construction services. Close competitor Fluor Corporation (FLR) is expected to report fourth quarter 2012 results on Feb 25, 2013, with the Zacks Consensus Estimate standing at of 70 cents. Jacobs currently holds a Zacks Rank #3 (Hold). Peers Willdan Group (WLDN) and National Technical Systems Inc. (NTSC) are currently doing well and are worth considering. Both the stocks hold a Zacks Rank #2 (Buy).

 
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