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Jacobs (JEC) Receives Contract for California WaterFix Plan

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Jacobs Engineering Group Inc. has received a contract from the Delta Conveyance Design and Construction Authority (“DCA”) to provide engineering design management (“EDM”) services for the California WaterFix program that carries a price tag of $17 billion.

The WaterFix program, the largest water conveyance project in California, will boster the water supply system of the state. Jacobs' initial $93 million contract will support the preliminary and final engineering design of this 15-year WaterFix program.

The program, which is slated to begin this year, will reform obsolete water infrastructure that is more than 50 years old and depends on levees. The project includes major infrastructure components like three water diversion intakes with modern fish screens, two large tunnels and pumping stations, along with new roads and utility relocations.

Jacobs will support DCA throughout the designing phase of this 15-year program, thereby giving a boost to the Buildings, Infrastructure and Advanced Facilities or BIAF segment.

The BIAF segment, which accounts for more than 41% of its total revenues, has delivered some of the largest infrastructure programs in North America and Europe. It provides full life cycle services, which include engineering design, construction management, design build, as well as operations and maintenance.

In fiscal 2018, the segment recorded revenues of $6.18 billion, up 61.5% year over year. This was mainly driven by CH2M acquisition, along with strong Life Sciences, Electronics, Water and Transport Infrastructure markets. Moreover, ongoing contract wins, increased focus on high-value businesses and efficient project execution added to the positives. Meanwhile, the segment’s backlog as of Sep 30, 2018 was $11.38 billion, increasing 67.6% year over year.

Notably, Jacobs’ top and bottom lines both increased significantly in fiscal 2018. Adjusted earnings increased 38% from the year-ago figure. Further, its revenues totaled $15 billion, reflecting healthy growth of 49.5% from the year-ago level. Backlog at the end of fiscal 2018 was $27.3 billion, 38% higher than the prior fiscal year.

Shares of Jacobs have outperformed its industry over a year. The outperformance was backed by a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with average of 12.4%.

Zacks Rank & Stocks to Consider

Currently, Jacobs carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Construction sector include Gates Industrial Corporation PLC (GTES - Free Report) , Altair Engineering Inc. (ALTR - Free Report) , and Great Lakes Dredge & Dock Corporation (GLDD - Free Report) . While Gates Industrial sports a Zacks Rank #1 (Strong Buy), Altair Engineering and Great Lakes both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gates Industrial, Altair Engineering and Great Lakes’ earnings for the current year are expected to increase 44.6%, 23.1% and 111%, respectively.

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