Back to top

Image: Bigstock

Factors Setting the Tone for Jacobs Engineering's (J) Q1 Earnings

Read MoreHide Full Article

Jacobs Engineering Group Inc. (J - Free Report) is slated to report first-quarter fiscal 2023 results on Feb 7, before market open.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 1.1% and 1.6%, respectively. On a year-over-year basis, its earnings rose 14% and revenues increased 6.3%.

The leading provider of professional, technical and construction services’ earnings topped the consensus mark in three of the last four quarters, with an average of 0.4%.

Trend in Estimates

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has increased to $1.61 from $1.60 in the past 30 days. The estimated figure indicates a 3.2% increase from $1.56 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $3.62 billion, suggesting 7% growth from the year-ago quarter’s reported figure of $3.38 billion.

Jacobs Solutions Inc. Price and EPS Surprise


Jacobs Solutions Inc. Price and EPS Surprise

Jacobs Solutions Inc. price-eps-surprise | Jacobs Solutions Inc. Quote

Factors to Note

Jacobs’ first-quarter fiscal 2023 performance is likely to have been aided by investments from the U.S. Infrastructure Act and other economic stimuli. Its strategic focus on transforming itself from an engineering and construction firm to a global technology-forward solutions company is expected to get reflected in the to-be-reported quarter’s numbers.

Also, a higher-margin backlog, focus on generating efficiencies through digital and technological solutions, and solid project execution are expected to have boosted growth.

J has been continuously shifting to digital and leadership in strategic end markets like space exploration, life sciences, and cyber and water solutions. Again, the U.S. Department of Defense’s increased focus on strategic data utilization is likely to have driven Jacobs’ growth.

A favorable revenue mix in both People & Places Solutions or P&PS and Critical Mission Solutions or CMS segments, and benefits from PA Consulting (which has a solid accretive gross margin profile of nearly 50%) are likely to get reflected in margins.

Segment-wise, higher spending from the transportation sector and accelerated investments toward drinking water, wastewater, flood protection and climate resilience are likely to have aided the company’s fiscal first-quarter performance in the P&PS segment (comprising 58% of total revenues in fiscal 2022).

Rapid implementation of digital technologies has been optimizing clients’ operational spending and mitigating revenue challenges. Further, environmental and green economy projects remained strong. However, foreign currency translation is expected to have weighed on the international business in the quarter.

The Zacks Consensus Estimate for the P&PS segment’s net revenues is pegged at $1,507 million, indicating an increase from $1,456 million a year ago. Meanwhile, the Zacks Consensus Estimate for the P&PS segment’s operating profit is pegged at $208 million, indicating a rise from the year-ago quarter’s reported figure of $192 million.

The Critical Mission Solutions or CMS segment (comprising 36% of total revenues) is expected to have benefited from the consistent performance of the Cyber and Mission-IT business. The company’s CMS strategy has been focused on creating resilient revenue growth and margin expansion by offering technology-enabled solutions aligned to critical national priorities that drive innovative outcomes. Jacobs has been pursuing global energy transition, space-based ISR, intelligence analytics and 5G networks.

The Zacks Consensus Estimate for the CMS segment’s revenues is pegged at $1,282 million, indicating growth from $1,163 million reported a year ago. The consensus mark for the CMS segment’s operating profit is $98 million, indicating a decline from $112 million recorded a year ago. The company expects 75 basis points of sequential operating margin expansion for the quarter.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Jacobs this time around. A 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. Unfortunately, that is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of +2.18%.

Zacks Rank: It currently carries a Zacks Rank #4 (Sell).

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

Stocks With Favorable Combination

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

Boise Cascade Company (BCC - Free Report) has an Earnings ESP of +0.90% and a Zacks Rank #3.

BCC’s earnings topped the consensus mark in all the last four quarters, the average surprise being 30.9%.

Fluor Corporation (FLR - Free Report) has an Earnings ESP of +2.48% and a Zacks Rank #2.

FLR’s earnings topped the consensus mark in one of the last four quarters but missed on three occasions, the average negative surprise being 38.2%.

Recent Construction Release

United Rentals, Inc.’s (URI - Free Report) fourth-quarter 2022 earnings and revenues missed the Zacks Consensus Estimate but increased on a year-over-year basis on the back of sustained demand in its end markets and the strength of its core rental business.

URI provided solid 2023 guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment, and solid visibility. Also, it unveiled a quarterly dividend of $1.48 per share, with an annualized yield of approximately 1.5%. The company also plans to restart its share repurchase program, with the intention to buyback $1 billion of common stock in 2023.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Published in