Jacobs Reaffirmed at Neutral - Analyst Blog
May 21 2013 - 2:30PM
Zacks
We reaffirmed our long-term Neutral
recommendation on Jacobs Engineering Group Inc.
(JEC) on May 15, 2013, as risk reward remains fairly balanced for
the stock at this juncture.
Why the
reiteration?
Jacobs’ earnings per share of 80
cents in fiscal second quarter of 2013, reported on Apr 30, missed
the Zacks Consensus Estimate of 82 cents. However, Jacobs’ earnings
improved 23.1% year over year.
Jacobs generated revenues of $2.83
billion in the fiscal quarter, an increase of 4.9%. The revenues
missed the Zacks Consensus Estimate of $2.94 billion by 3.6%.
Since the announcement of the
results, estimates have moved in either direction for fiscal 2013
and 2014. The current consensus estimate for fiscal 2013 rests at
$3.30, a decrease of 1.0% over the last 30 days. For fiscal 2014,
the current estimate decreased by a cent to $3.75 per share, over
the same time frame.
In the coming quarters, growth in
infrastructure, mining and minerals, refining, oil & gas and
chemicals are expected to augment both earnings and revenue. Jacobs
has also been successful in gaining the confidence of its
customers, inducing them to trade again with the company, resulting
in a high proportion of the business earned through repeat
customers. Per the company, around 65% of the work obtained is
through long-term relationship, which is illustrated in the 94%
repeat business done in the fiscal second quarter of
2013.
However, Jacobs’ dependence on
third party suppliers is taken as a negative, since fund crisis
among such dealers may even lead to discontinuation of their
businesses. Under such circumstances, the company may fall prey to
deferred project delivery, loss of goodwill or even order
cancellation by clients due to the delay.
Also, Jacobs’ business operations
outside the U.S. make the company prone to foreign currency risks
and difficult economic and political scenario in the country of
operations.
Other Stocks to
Consider
Jacobs currently carries a Zacks
Rank #3 (Hold). Other stocks to watch out for in the construction
industry are Michael Baker Corporation (BKR),
carrying a Zacks Rank #1 (Strong Buy); while, Harris &
Harris Group, Inc. (TINY) and Quanta Services,
Inc. (PWR), carry a Zacks Rank #2 (Buy).
BAKER (MICHAEL) (BKR): Free Stock Analysis Report
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
QUANTA SERVICES (PWR): Free Stock Analysis Report
HARRIS & HARRIS (TINY): Get Free Report
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