On Feb 6, 2015, we issued an updated research report on the premium technical service company, Jacobs Engineering Group Inc. (JEC). A renowned construction, professional and technical service provider, Jacobs serves large number of public and corporate clients worldwide. Since its inception in 1945, the company has remarkably improved the scale of its business, and presently employs roughly 63400 workers across its various locations. However, Jacobs faces certain internal and external headwinds in its trade.
Scopes for Improvement
Effective cost-reduction initiatives and booming demand of technical services are expected to drive higher margins and revenues in the upcoming quarters for Jacobs. The company recently secured several contracts from renowned firms like Novus International, Inc., BP Chembel N.V., Texas Department of Transportation, BP Gelsenkirchen GmbH, Pfizer Inc. and Malaysian Resources Corp. Such lucrative deals are expected to escalate the company’s top line in the quarters ahead. Moreover, Jacobs attempts to increase its shareholders’ value through introduction of share repurchase programs. By lowering the share count, such initiatives are predicted to improve the company’s earnings per share in the near future.
Problems to Consider
Jacobs aims to organically expand its business on the back of lucrative contract wins. However, increasing direct cost of contracts might significantly weigh on the company’s margin, going forward. Also, due to its international presence, Jacobs’ business is highly vulnerable to threats of adverse market uncertainties. Recently, due to headwinds from fluctuating oil and commodity prices, Jacobs lowered its earnings guidance for the upcoming fiscal year. At the same time, the company’s trade faces intense competition and is constantly exposed to risks of market share loss.
With a market capitalization of $5.25 billion, Jacobs currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry are VSE Corp. (VSEC), Willdan Group, Inc. (WLDN) and Pernix Group Inc (PRXG). While both VSE Corp. and Willdan Group, Inc. sport a Zacks Rank #1 (Strong Buy), Pernix Group Inc carries a Zacks Rank #2 (Buy).
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