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Game for Higher Returns? Bet on Jacobs’ (JEC) Stock Now


With 444 S&P 500 members having reported their quarterly figures as of May 9, the first-quarter earnings season is nearing its last leg. Total earnings for these companies are up 24.5% year over year on 9.3% higher revenues, with 77.7% beating earnings estimates and 75% surpassing top-line expectations.

This year’s January-March earnings scorecard has been impressive, with the Construction sector currently ruling the roost among the 16 Zacks sectors. Increased public spending, lower tax rates, upbeat wage rates and reduced trade deficits are expected to propel the economic growth and augment aggregate construction spending in the country.

Given this backdrop, investors can make the most of the opportunity by betting on top-ranked construction stocks for valuable returns. Among the numerous potential gainers, adding Jacobs Engineering Group Inc. JEC to your portfolio will be a valuable investment choice at the moment. On a month-to-date basis, this Zacks Rank #2 (Buy) stock has rallied 9.4%, outperforming the sectoral gain of 2.2%.

The attractiveness of this stock as a current investment choice is further accentuated by its favorable VGM Score of A.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Why Should You Grab the Stock?

Top-Line Prospects: Trump’s efforts to boost infrastructure spending in the United States as well as economic boom in other major overseas end-markets like China and India have been triggering demand for Jacob’s state-of-the-art construction and engineering services for the past few quarters.

In the fiscal second quarter, Jacobs’ revenues surpassed the Zacks Consensus Estimate by 11.4% and also outpaced the year-ago tally by 69.7%. Top-line performance of Aerospace, Technology, Environmental and Nuclear segment improved on the back of increased government and commercial spending in major end-markets as well as market share gains. Buildings, Infrastructure and Advanced Facilities segment’s sales were up in the reported quarter due to rise in global infrastructure spending. Further, Energy, Chemicals and Resources segment’s revenues in the fiscal second quarter were up on the back of superior project execution as well as increased opportunities in the mining and energy markets. These positives are likely to continue to drive Jacobs’ top-line performance in the quarters ahead.

Jacobs’ revenues are expected to be up 46.9% year over year in fiscal 2018 (ending September 2018) and 9.4% year over year in fiscal 2019 (ending September 2019).

Slew of Contract Wins: Jacobs has a solid contract-winning history. In the last few months, the company has secured several contracts from renowned institutions and public-sector agencies like the ENCINA Chemicals, LLC, Sasol Group Technology, Chevron Corporation CVX, the U.S. Army, Exxon Mobil Corporation XOM, Kraton Corporation KRA and Codelco. Such deals are anticipated to boost the revenues and profit-making prospects in the quarters ahead.

Buyout & Restructuring Initiatives: Jacobs has been reinforcing its business on the back of diligent business acquisitions. In sync with this, the company successfully acquired CH2M HILL Companies Ltd. — ‘CH2M’ — (December 2017) for approximately $2.9 billion. Jacobs expects to accrue cost synergies worth nearly $150 million in fiscal 2018, on the back of this buyout.

From the fiscal second quarter, Jacobs is reporting results under three global lines of businesses, instead of four as before. The company restructured its operational segments to integrate CH2M within its business and expects the move to boost its operational efficacy over time.

Profitability: Jacobs has pulled off an average positive earnings surprise of 12.34% over the last four quarters. The company believes that increased focus over high-value businesses, efficient project execution and wider margins will drive its bottom-line performance in the near term.

Moreover, Jacobs has stated that reduced corporate tax rates (due to implementation of Tax Cuts and Jobs Act in December 2017) will help bolster its earnings in the upcoming fiscals.

The company’s adjusted earnings in the fiscal second quarter of 2018 surpassed the Zacks Consensus Estimate by 13.6% and even exceeded the year-ago tally by 28.2%. Notably, Jacobs has raised its fiscal 2018 adjusted earnings projection to $4.00-$4.40 per share range from the previous forecast of $3.85-$4.25 per share.

The company’s earnings per share are anticipated to be up 31.5% in fiscal 2018 and 18% in fiscal 2019.

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