Jacobs Wins Railroad Contract

Jacobs Engineering Group Inc. (JEC - Snapshot Report) yesterday signed a contract with Amtrak, the National Railroad Passenger Corporation. According to the contract, the company will provide program management and construction management services for more than 100 infrastructure improvement projects (at over 360 locations). The potential value in excess of $560 million will be funded through the American Recovery and Reinvestment Act (ARRA) economic-stimulus package.
 
Under this contract, Jacobs will manage, procure, and administer, in part or in full, the design and construction of projects such as maintenance facility upgrades, bridge replacements, track work, security enhancements, and various station improvements.
 
In support of small and minority-owned businesses, Jacobs and Amtrak will set individual goals for significant levels of small and disadvantaged business enterprise participation, and contract projects to create jobs that will further economic recovery and provide long-term benefits.
 
With annual revenues exceeding $12 billion, Jacobs is one of the world's largest and most diverse providers of technical, professional and construction services. Its major competitors are Foster Wheeler AG (FWLT - Analyst Report) and Fluor Corp. (FLR - Snapshot Report).
 
The company’s diversification in terms of markets, geography and services will continue to facilitate future growth. Moreover, Jacobs’ cost focus puts it in a dominant position to expand margins under difficult economic circumstances.
 
At the end of the third quarter, the company’s net cash position grew to $1 billion, up $254 million from the previous quarter and over $450 million from the beginning of 2009. This is a great story from an investment perspective. Jacobs has a strong balance sheet, which is expected to grow at a compound rate of 15% over the long-term.
 
Jacobs is among those infrastructure stocks that may benefit from the coming construction boom. Looking forward, as banks get healthy and are willing to lend and the next round of stimulus begins, investors can expect infrastructure projects to increase.