On Nov 28, 2016, Zacks Investment Research upgraded Jacobs Engineering Group Inc. JEC to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell). Going by the Zacks model, companies holding a Zacks Rank #3 have chances of performing in line with the broader market.
Why to Hold
Jacobs has lately segregated its operating and reporting structure into four major business segments. The move is expected to streamline the company’s operations in the near term and nurture new commercial growth opportunities. Also, the company intends to offer superior quality services to its global clients with this move. Notably, the shifting of the global headquarters to Dallas will likely improve the efficiency of Jacobs’ operations in the near term. The company’s new contract wins are also expected to boost revenues in the quarters ahead. In addition, Jacobs is trying to improve its cash flow in order to reward shareholders with lucrative share buyback programs.
However, we notice that Jacobs is currently challenged by several headwinds. For instance, sluggish economic conditions of certain emerging markets like China and weak global economic growth projections have dragged down commodity and construction service prices, weighing on the company’s top line. Moreover, weak energy resource prices are responsible for trimming the number of high-value contracts secured by Jacobs from energy companies. In addition, a stronger U.S. dollar and stiff industry rivalry remain major causes of concern for Jacobs. We believe that these bearish aspects hurt Jacobs’ revenues and earnings in fourth-quarter fiscal 2016. Quarterly top- and bottom-line figures declined from the year-ago tallies by 15.3% and 3.8%, respectively.
The Zacks Consensus Estimate for the stock has been revised downward for fiscal 2017 and 2018, in the last seven days. The downside reflects brokers’ cautiousness toward the stock.
Stocks to Consider
Better-ranked stocks within the industry are listed below:
Willdan Group, Inc. WLDN, with an average positive earnings surprise of 18.72% for the trailing four quarters, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MasTec, Inc. MTZ currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 61.27% for the trailing four quarters.
Comfort Systems USA, Inc. FIX currently carries a Zacks Rank #2 and has an average positive earnings surprise of 15.83% for the trailing four quarters.
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