Jacobs (JEC) to Post Q1 Earnings: What’s in the Offing?

Jacobs Engineering Group Inc. JEC is scheduled to report first-quarter fiscal 2019 results on Feb 6, before the opening bell.

In the last reported quarter, the company’s earnings came in at $1.31 per share, beating the Zacks Consensus Estimate of $1.22 by 7.4%, while revenues lagged the same by 2.5%. In fact, Jacobs surpassed earnings estimates in eight of the trailing 10 quarters.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the quarter to be reported is currently pegged at $1.05 per share, remaining stable over the past 30 days. Nevertheless, this reflects an increase of 36.4% from the year-ago earnings of 77 cents per share. Revenues are expected to be $3.81 billion, up 38.7% year over year.

Factors at Play

Jacobs’ fiscal first quarter is likely to benefit from solid end-market demand and transformed business portfolio. From an end market perspective, the company remains well positioned given U.S. federal government's increased focus on defense, energy, intelligence community, and NASA. Jacobs’ largest contracts are aligned to mission critical areas within the federal budget and hence are less discretionary in nature. Additionally, given the highly fragmented nature of the government services market, its strong technical expertise, unique localized delivery model, and an industry-leading efficient cost structure will certainly contribute to top and bottom-line growth.

Meanwhile, post the sale of Energy Chemicals and Resources or ECR business, which is likely to be completed in the first half of fiscal 2019, Jacobs intends to provide higher-value sustainable and digitally-enabled solutions for infrastructure and government clients worldwide.

That said, investors should note that the fiscal first quarter is seasonally regarded as the lowest growth quarter for Jacobs, given the winter aspects associated with the quarter.

Meanwhile, the company expects elevated defense spending in major economies like the United States, new organic investments, bolt-on acquisitions, superior customer relationships and sturdier demand for state-of-the-art technology solutions to boost revenues of the Aerospace, Technology, Environmental and Nuclear or ATEN line of business. Overall, Jacob’s ATEN business is executing well and is positioned to deliver profitable growth in fiscal 2019.

The company’s BIAF segment is well positioned, given favorable infrastructure spending. In the U.K., multi-year programs such as the Environment Agency's TEAM2100 and Highways England's Routes to Market, a six-year program to transform England's motorways, also bode well for Jacobs. Asia Pacific demand is underpinned by strong public investment in rail and other infrastructure investments. The water business is expected to benefit from a major water upcycle in the United States. Again, within transportation, aviation continues to be strong in the United States and Asia.

Overall, stellar top-line performance of the aforementioned segments, along with prudent cost management and improved project execution are expected to have reinforced the company’s bottom-line performance in the to-be-reported quarter.

What Does the Zacks Model Say?

Our proven model does not conclusively show that Jacobs is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Jacobs currently carries a Zacks Rank #2.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are a few construction stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming release:

Taylor Morrison Home Corporation TMHC has an Earnings ESP of +25.00% and a Zacks Rank #3.

Winnebago Industries, Inc. WGO has an Earnings ESP of +12.92% and a Zacks Rank #3.

Owens Corning Inc OC has an Earnings ESP of +2.15% and holds a Zacks Rank #3.

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