CPChem Contract for Jacobs

Recently, Jacobs Engineering Group Inc. (JEC - Analyst Report) announced that it has been awarded a contract from Chevron Phillips Chemical Company LP (CPChem). The contract entails providing front end engineering and design (FEED) services for two polyethylene facilities.

These two polyethylene facilities are part of CPChem's U.S. Gulf Coast (USGC) Petrochemicals Project. They are expected to utilize CPChem's proprietary Loop Slurry Technology and are planned to be located in Old Ocean, Texas near the Chevron Phillips Chemical Sweeny facility.

The contract is expected to strengthen Jacobs’ long standing relationship with Chevron Phillips Chemical. Mike Autrey, Jacobs’ Group Vice President, was quite optimistic about their contribution to the success of the U.S. Gulf Coast Petrochemical Project. The contract value has not yet been disclosed.

Jacobs being a dominant player in engineering and construction business is expected to benefit from its continuous contract wins. We believe Jacobs’ flexible cost structure and impressive track record of in-time project execution will help it to retain its long-term relationships with its core clientele. Also, these strategic contract wins are likely to fuel the company’s expansion across geographies and services in the quarters ahead.

Moreover, constant developments in the aviation, rail, water, transit and telecom businesses as well as rapid growth in oil, gas and mining industry are also likely to be a major growth driver for the company. The company provides stiff competition to other industry players including Fluor Corporation (FLR - Analyst Report) and Foster Wheeler AG (FWLT - Analyst Report).

We currently maintain a ‘Neutral’ recommendation on Jacobs. The stock also bears a Zacks #3 Rank, which implies a short-term (1-3 months) ‘Hold’ rating.