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Jacobs (JEC) Earnings Top, Revenues Lag Estimates in Q3
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Jacobs Engineering Group Inc. posted adjusted earnings (excluding after-tax costs related to certain restructuring activities) of 78 cents per share in the third quarter of fiscal 2016. Quarterly earnings comfortably beat the Zacks Consensus Estimate of 74 cents per share but plunged 19.6% on a year-over-year basis.
The bottom-line decline was largely attributable to the absence of a discrete tax benefit that was present in the year-ago quarter. Also, dismal top-line performance hurt earnings in the quarter.
Revenues
Second-quarter revenues decreased 7.3% year over year to $2,693.9 million and also fell short of the Zacks Consensus Estimate of $2,797 million.
Poor sales in three out of the company’s four segments resulted in the weak top-line performance.
Segment Details
Revenues of Petroleum & Chemicals segment came in at $766.5 million, down 22.1% year over year. The Aerospace & Technology segment’s quarterly sales dipped 4.5% year over year to $667.8 million. Buildings & Infrastructure segments’ sales were down 6.8% year over year to $553.5 million. However, Industrial segment revenues were up 11.9% year over year to $706.0 million.
Costs/Margin
Direct costs of contracts, a major expenditure for Jacobs, decreased 7.4% year over year to $2,242.4 million. Selling, general and administrative expenses declined approximately 11% year over year to $341.9 million. However, the company’s operating margin contracted 70 basis points (bps) year over year to 4.1%.
Jacobs exited the quarter with backlog of $18.3 billion as against $18.8 billion a year ago.
Balance Sheet/Share Repurchase Update
As of Jul 1, 2016, Jacobs’ cash and cash equivalents were approximately $616.4 million compared with $460.9 million as of Oct 2, 2015. Total debt decreased to roughly $479 million from $584.4 million as of Oct 2, 2015.
The company’s capital expenditure at the end of the fiscal third quarter amounted to $17.1 million, up 69.3% year over year.
During the fiscal third quarter, the company repurchased 0.6 million shares of common stock for $30 million.
Outlook
Jacobs is poised to overcome end-market challenges supported by its robust operational performance. The company aims to improve its business via prompt project delivery, appropriate cost reduction and greater business diversification.
However, Jacobs anticipates macroeconomic headwinds such as strengthening of the U.S. dollar and weakness in the global commodity as well as energy market prices to weigh on its revenues and earnings in the near future.
Based on the current market scenario, Jacobs reiterated its full-year fiscal 2016 earnings guidance to the range of $2.90–$3.20 per share.
Going forward, we believe that the company’s diligent cost saving and restructuring initiatives will help it combat some of the macroeconomic weaknesses. Moreover, the robust backlog level reflects the company’s focus on sales growth. Also, the company’s robust liquidity position as indicated by improvements in margin, cash flow and working capital adds to its strength.
Jacobs presently holds a Zacks Rank #2 (Buy). Other well-ranked stocks in the industry include Willdan Group, Inc. (WLDN - Free Report) , AECOM (ACM - Free Report) and A.O. Smith Corp. (AOS - Free Report) . While Willdan Group sports a Zacks Rank #1 (Strong Buy), both AECOM and A.O. Smith Corp. hold same Zacks Rank as Jacobs.
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Jacobs (JEC) Earnings Top, Revenues Lag Estimates in Q3
Jacobs Engineering Group Inc. posted adjusted earnings (excluding after-tax costs related to certain restructuring activities) of 78 cents per share in the third quarter of fiscal 2016. Quarterly earnings comfortably beat the Zacks Consensus Estimate of 74 cents per share but plunged 19.6% on a year-over-year basis.
The bottom-line decline was largely attributable to the absence of a discrete tax benefit that was present in the year-ago quarter. Also, dismal top-line performance hurt earnings in the quarter.
Revenues
Second-quarter revenues decreased 7.3% year over year to $2,693.9 million and also fell short of the Zacks Consensus Estimate of $2,797 million.
Poor sales in three out of the company’s four segments resulted in the weak top-line performance.
Segment Details
Revenues of Petroleum & Chemicals segment came in at $766.5 million, down 22.1% year over year. The Aerospace & Technology segment’s quarterly sales dipped 4.5% year over year to $667.8 million. Buildings & Infrastructure segments’ sales were down 6.8% year over year to $553.5 million. However, Industrial segment revenues were up 11.9% year over year to $706.0 million.
Costs/Margin
Direct costs of contracts, a major expenditure for Jacobs, decreased 7.4% year over year to $2,242.4 million. Selling, general and administrative expenses declined approximately 11% year over year to $341.9 million. However, the company’s operating margin contracted 70 basis points (bps) year over year to 4.1%.
Jacobs exited the quarter with backlog of $18.3 billion as against $18.8 billion a year ago.
Balance Sheet/Share Repurchase Update
As of Jul 1, 2016, Jacobs’ cash and cash equivalents were approximately $616.4 million compared with $460.9 million as of Oct 2, 2015. Total debt decreased to roughly $479 million from $584.4 million as of Oct 2, 2015.
The company’s capital expenditure at the end of the fiscal third quarter amounted to $17.1 million, up 69.3% year over year.
During the fiscal third quarter, the company repurchased 0.6 million shares of common stock for $30 million.
Outlook
Jacobs is poised to overcome end-market challenges supported by its robust operational performance. The company aims to improve its business via prompt project delivery, appropriate cost reduction and greater business diversification.
However, Jacobs anticipates macroeconomic headwinds such as strengthening of the U.S. dollar and weakness in the global commodity as well as energy market prices to weigh on its revenues and earnings in the near future.
Based on the current market scenario, Jacobs reiterated its full-year fiscal 2016 earnings guidance to the range of $2.90–$3.20 per share.
JACOBS ENGIN GR Price, Consensus and EPS Surprise
JACOBS ENGIN GR Price, Consensus and EPS Surprise | JACOBS ENGIN GR Quote
Our Take
Going forward, we believe that the company’s diligent cost saving and restructuring initiatives will help it combat some of the macroeconomic weaknesses. Moreover, the robust backlog level reflects the company’s focus on sales growth. Also, the company’s robust liquidity position as indicated by improvements in margin, cash flow and working capital adds to its strength.
Jacobs presently holds a Zacks Rank #2 (Buy). Other well-ranked stocks in the industry include Willdan Group, Inc. (WLDN - Free Report) , AECOM (ACM - Free Report) and A.O. Smith Corp. (AOS - Free Report) . While Willdan Group sports a Zacks Rank #1 (Strong Buy), both AECOM and A.O. Smith Corp. hold same Zacks Rank as Jacobs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>