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Jacobs (J) Stock Sees 13.8% Gain in 3 Months Amid Challenges
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Jacobs Solutions Inc. (J - Free Report) has been generating substantial recurring revenues that are complemented by accelerating growth in the areas of climate response, consulting & advisory and data solutions. Accelerating demand for Jacobs’s consulting services for infrastructure, water, environment, space, broadband, cybersecurity and life sciences depict incremental growth opportunities. These factors have helped the company to gain 13.8% over the past three months, outperforming the industry’s 4.4% rise.
In November 2022, the company reported fiscal 2022 with strong top and bottom-line performance, positioning the company for continued growth in fiscal 2023. In fiscal 2022, net revenues increased 5.9% year over year and adjusted EPS grew 10%. Adjusted EBITDA grew 10% to $1.4 billion and up 12% in constant currency.
Efficient Project Execution & Solid Backlog: Efficient project execution has been one of the main characteristics in driving Jacobs’ performance over the last few quarters. At fiscal 2022-end, it reported a backlog of $27.9 billion, up 5% year over year (up 8% at constant currency). This reflects persistent solid demand for Jacobs' consulting services. Of this backlog, Critical Mission Solutions or CMS accounted for $10.56 billion, which provided a strong visibility into the base business. The company’s overall 24-month new business pipeline of about $30 billion remains robust. This segment is benefiting from well-funded government programs and cyber, U.S. Department of Defense, mission-IT, space, nuclear, as well as 5G-related projects.
People & Places Solutions or P&PS backlog at fiscal 2022-end was $17 billion, up from $15.74 billion a year ago. The P&PS segment’s overall sales pipeline remains solid as climate, decarbonization and social value gaining momentum across sectors.
PA Consulting backlog amounted to $269 million at fiscal 2022-end (versus $304 million a year ago). PA's ability to assist clients through economic cycles is generating consistent demand for its expertise.
Energy Transition & Infrastructural Push to Drive Growth: Development and deployment of technology solutions across the full spectrum of decarbonization efforts, including carbon management mitigation and compliance consulting, as well as all facets of infrastructure for providing carbon-free energy solutions, will benefit the company going forward. Notably, Jacobs continues to experience growing demand for renewable generation and infrastructure solutions, giving continued confidence in its multi-year financial targets.
Based on fiscal 2022 average FX rates, Jacobs expects adjusted EBITDA between $1,465 million and $1,545 million and adjusted earnings within $7.60-$7.90 per share (up 10% and 12%, respectively, at the midpoints).
Meanwhile, based on FX rates in early November, Jacobs expects adjusted EBITDA between $1,400 million and $1,480 million and adjusted earnings within $7.20-$7.50 per share (up 6% both at the midpoints).
Hurdles
Currency Headwind: For fiscal 2022, clients outside the United States accounted for 34% of revenues. Constant appreciation of the U.S. dollar with respect to other major currencies, such as euro and yen might continue to hurt its overseas market revenues as well as profitability. Within P&PS segment, the company expects international business to continue to be materially impacted by FX during fiscal 2023, resulting in flattish reported revenue growth but is poised for full year growth on a constant currency basis.
High Expenses: Labor-related medical costs, incentive expenses, IT-related investment costs as well as other investments may put pressure on margins. Jacobs unveiled that non-allocated corporate costs were $28 million for fourth-quarter fiscal 2022. For fiscal 2023, Jacobs expects non-allocated corporate costs in the range of $190-$210 million, given higher expected incentive costs on a year-over-year basis.
3 Better-Ranked Business Services Stocks Hogging the Limelight
Some better-ranked stocks which warrant a look in the Business Services sector are:
Allot Ltd. (ALLT - Free Report) — carrying a Zacks Rank #1— is a provider of network intelligence and security solutions for service providers and enterprises.
ALLT’s expected earnings growth rate for 2023 is 24.2%. Shares of ALLT have declined 71.6% over the past year.
DocuSign, Inc. (DOCU - Free Report) — carrying a Zacks Rank #1— provides electronic signature software in the United States and internationally.
DOCU’s expected earnings growth rate for fiscal 2024 is 12%. Shares of DOCU have declined 60% over the past year.
Agora, Inc. (API - Free Report) — carrying a Zacks Rank #2 (Buy) — provides Real-Time Engagement Platform-as-a-Service in the People's Republic of China, the United States and internationally.
API’s expected earnings growth rate for 2023 is 40.7%. Shares of API have declined 69% over the past year.
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Jacobs (J) Stock Sees 13.8% Gain in 3 Months Amid Challenges
Jacobs Solutions Inc. (J - Free Report) has been generating substantial recurring revenues that are complemented by accelerating growth in the areas of climate response, consulting & advisory and data solutions. Accelerating demand for Jacobs’s consulting services for infrastructure, water, environment, space, broadband, cybersecurity and life sciences depict incremental growth opportunities. These factors have helped the company to gain 13.8% over the past three months, outperforming the industry’s 4.4% rise.
In November 2022, the company reported fiscal 2022 with strong top and bottom-line performance, positioning the company for continued growth in fiscal 2023. In fiscal 2022, net revenues increased 5.9% year over year and adjusted EPS grew 10%. Adjusted EBITDA grew 10% to $1.4 billion and up 12% in constant currency.
However, this Zacks Rank #3 (Hold) company remains vulnerable to currency headwinds and rising costs. Also, stiff competition is a concern. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Growth Drivers
Efficient Project Execution & Solid Backlog: Efficient project execution has been one of the main characteristics in driving Jacobs’ performance over the last few quarters. At fiscal 2022-end, it reported a backlog of $27.9 billion, up 5% year over year (up 8% at constant currency). This reflects persistent solid demand for Jacobs' consulting services. Of this backlog, Critical Mission Solutions or CMS accounted for $10.56 billion, which provided a strong visibility into the base business. The company’s overall 24-month new business pipeline of about $30 billion remains robust. This segment is benefiting from well-funded government programs and cyber, U.S. Department of Defense, mission-IT, space, nuclear, as well as 5G-related projects.
People & Places Solutions or P&PS backlog at fiscal 2022-end was $17 billion, up from $15.74 billion a year ago. The P&PS segment’s overall sales pipeline remains solid as climate, decarbonization and social value gaining momentum across sectors.
PA Consulting backlog amounted to $269 million at fiscal 2022-end (versus $304 million a year ago). PA's ability to assist clients through economic cycles is generating consistent demand for its expertise.
Energy Transition & Infrastructural Push to Drive Growth: Development and deployment of technology solutions across the full spectrum of decarbonization efforts, including carbon management mitigation and compliance consulting, as well as all facets of infrastructure for providing carbon-free energy solutions, will benefit the company going forward. Notably, Jacobs continues to experience growing demand for renewable generation and infrastructure solutions, giving continued confidence in its multi-year financial targets.
Based on fiscal 2022 average FX rates, Jacobs expects adjusted EBITDA between $1,465 million and $1,545 million and adjusted earnings within $7.60-$7.90 per share (up 10% and 12%, respectively, at the midpoints).
Meanwhile, based on FX rates in early November, Jacobs expects adjusted EBITDA between $1,400 million and $1,480 million and adjusted earnings within $7.20-$7.50 per share (up 6% both at the midpoints).
Hurdles
Currency Headwind: For fiscal 2022, clients outside the United States accounted for 34% of revenues. Constant appreciation of the U.S. dollar with respect to other major currencies, such as euro and yen might continue to hurt its overseas market revenues as well as profitability. Within P&PS segment, the company expects international business to continue to be materially impacted by FX during fiscal 2023, resulting in flattish reported revenue growth but is poised for full year growth on a constant currency basis.
High Expenses: Labor-related medical costs, incentive expenses, IT-related investment costs as well as other investments may put pressure on margins. Jacobs unveiled that non-allocated corporate costs were $28 million for fourth-quarter fiscal 2022. For fiscal 2023, Jacobs expects non-allocated corporate costs in the range of $190-$210 million, given higher expected incentive costs on a year-over-year basis.
3 Better-Ranked Business Services Stocks Hogging the Limelight
Some better-ranked stocks which warrant a look in the Business Services sector are:
Allot Ltd. (ALLT - Free Report) — carrying a Zacks Rank #1— is a provider of network intelligence and security solutions for service providers and enterprises.
ALLT’s expected earnings growth rate for 2023 is 24.2%. Shares of ALLT have declined 71.6% over the past year.
DocuSign, Inc. (DOCU - Free Report) — carrying a Zacks Rank #1— provides electronic signature software in the United States and internationally.
DOCU’s expected earnings growth rate for fiscal 2024 is 12%. Shares of DOCU have declined 60% over the past year.
Agora, Inc. (API - Free Report) — carrying a Zacks Rank #2 (Buy) — provides Real-Time Engagement Platform-as-a-Service in the People's Republic of China, the United States and internationally.
API’s expected earnings growth rate for 2023 is 40.7%. Shares of API have declined 69% over the past year.