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Jacobs (J) to Report Q2 Earnings: What's in the Offing?

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Jacobs Engineering Group Inc. (J - Free Report) is slated to report second-quarter fiscal 2021 results on May 10, before the opening bell.

In the last reported quarter, the company’s earnings and revenues beat the respective Zacks Consensus Estimate by 12.8% and 0.1%. On a year-over-year basis, this leading provider of professional, technical and construction services’ earnings and revenues grew 17% and 0.6%, respectively.

Jacobs’ earnings topped the consensus mark in all the last four quarters, with the average being 18.9%.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been unchanged at $1.37 over the past 30 days. The estimated figure indicates a 1.4% decrease from $1.39 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $3.50 billion, suggesting 2% growth from the year-ago reported figure of $3.43 billion.

Factors to Note

Jacobs’ fiscal second-quarter revenues are expected to have improved from the year-ago period. Its strategic focus on transforming itself from an engineering and construction to a global technology-forward solutions company is expected to reflect on fiscal second-quarter results. Also, higher-margin backlog, focus on generating efficiencies through digital and technological solutions along with solid project execution are expected to have boosted its growth. Again, Jacobs is expected to have gained from focus on digital modernization of the business. The U.S. Department of Defense’s increased focus on strategic data utilization is also likely to have driven growth for Jacobs.

Its continuous shift to digital and leadership in strategic end markets like space exploration, life sciences, cyber as well as water solutions is likely to have benefited the company’s fiscal second-quarter performance.

However, revenues for the first half of fiscal 2021 is still expected to be negatively impacted by the mix of two low-margin contracts. One of these contracts is the low-margin Hanford Plateau project. Again, a higher mix of CMS revenues carrying lower gross margins is likely to reflect on the company’s bottom-line results.

Segment-wise, Jacobs’s People & Places Solutions or P&PS segment (comprising 63% of total revenues) is expected to have witnessed relatively flat growth. Higher spending from the transportation sector and accelerated investments toward drinking water, wastewater, flood protection and climate resilience might have aided the company’s fiscal second-quarter performance. Rapid implementation of digital technologies has been optimizing clients’ operational spend and mitigating their revenue challenges. Moreover, environmental and green economy projects have been strong.

The Zacks Consensus Estimate for the P&PS segment’s revenues is pegged at $2,184 million, indicating no change from a year ago.

That said, higher-margin mix in the sales pipeline and lower costs arising from its focus on Focus 2023 initiatives are likely to have aided margins. The Zacks Consensus Estimate for the P&PS segment’s operating profit is pegged at $196 million, indicating 3.7% growth from a year ago.

The Critical Mission Solutions or CMS segment (comprising 37% of total revenues) is expected to have benefited from persistently strong performance of the Cyber and Mission-IT business. The Zacks Consensus Estimate for the CMS segment’s revenues is pegged at $1,302 million, indicating 4.7% growth from a year ago.

The consensus mark for CMS segment’s operating profit is $108 million, suggesting growth from $84 million a year ago.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Jacobs this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Jacobs currently carries a Zacks Rank #2.

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

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

AECOM (ACM - Free Report) has an Earnings ESP of +2.93% and a Zacks Rank #3.

Floor & Decor Holdings, Inc. (FND - Free Report) has an Earnings ESP of +2.32% and a Zacks Rank #3.

Fluor Corporation (FLR - Free Report) has an Earnings ESP of +107.69% and a Zacks Rank #3.

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