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Jacobs (JEC) to Report Q2 Earnings: Is a Beat in Store?

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Jacobs Engineering Group Inc. (JEC - Free Report) is scheduled to report second-quarter fiscal 2019 results on May 7, before the opening bell.

In the last reported quarter, the company’s earnings and revenues missed the Zacks Consensus Estimate by 25.7% and 19.1%, respectively. However, its earnings from continuing operations of 78 cents per share increased from the year-ago figure of 46 cents. The upsurge was mainly attributable to strong revenues and margins. Jacobs’ revenues totaled $3,083.8 million, reflecting healthy growth of 73% from the year-ago quarter (up 12% on a pro-forma basis).

Which Way are Estimates Trending?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for the quarter to be reported has declined from $1.23 to $1.22 over the past 30 days. Nevertheless, this indicates a solid increase of 22% from the year-ago earnings of $1.00 per share. However, revenues are expected to be $3.13 billion, down 20.4% year over year.

How Will Revenues Shape Up?

Notably, Jacobs restated its results to mark Energy, Chemicals and Resources line of business or ECR as a discontinued operation in the fiscal first quarter. Additionally, effective first-quarter fiscal 2019, the company’s segments have been realigned by shifting the Global Environmental Solutions ("GES") business from the Aerospace, Technology and Nuclear (“ATN”) segment to the Buildings, Infrastructure and Advanced Facilities (“BIAF”) segment. This restatement is likely to make difficult comparisons.

Jacobs’ fiscal second quarter is likely to benefit from solid end-market demand and transformed business portfolio. From an end-market perspective, the company remains well positioned, given the U.S. federal government's increased focus on defense, energy, intelligence community and NASA. Jacobs’ largest contracts are aligned to mission critical areas within the federal budget and hence are less discretionary in nature. Given the highly fragmented nature of the government services market, its strong technical expertise, unique localized delivery model and an industry-leading efficient cost structure will certainly contribute to top and bottom-line growth.

The company expects elevated defense spending in major economies like the United States, new organic investments, bolt-on acquisitions, superior customer relationships and sturdier demand for state-of-the-art technology solutions to boost revenues from the ATN line of business.

The BIAF segment is well positioned, given favorable infrastructure spending. In the U.K., multi-year programs such as the Environment Agency's TEAM2100 and Highways England's Routes to Market, a six-year program to transform England's motorways, also bode well for Jacobs. Asia Pacific demand is underpinned by strong public investment in rail and other infrastructure investments. The water business is expected to benefit from a major water upcycle in the United States. Within transportation, aviation continues to be strong in the United States and Asia.

Encouraging Earnings Scenario

Overall, stellar top-line performance of the aforementioned segments, prudent cost management and improved project execution are expected to have reinforced the company’s bottom-line performance in the to-be-reported quarter.

Its efforts toward increasing the share of higher margin backlog, and dependence on recurring revenues and rebid wins are expected to give a significant boost to the bottom line.

What the Zacks Model Says

Our proven model shows that Jacobs is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +4.92%. 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.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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

Peer Releases

Quanta Services Inc. (PWR - Free Report) kicked off 2019 on an impressive note, backed by strong Electric Power Infrastructure Services business. The company reported first-quarter 2019 adjusted earnings of 96 cents per share, surpassing the Zacks Consensus Estimate of 86 cents by 11.6%.

Fluor Corporation (FLR - Free Report) reported first-quarter 2019 results, wherein the top and bottom lines missed the Zacks Consensus Estimate. The company reported adjusted loss of 14 cents per share in the quarter that fared unfavorably with the Zacks Consensus Estimate of earnings of 54 cents.

KBR, Inc. (KBR - Free Report) reported better-than-expected results in first-quarter 2019. Notably, industry-leading organic growth in Government Services and Technology business led to the company’s impressive performance. Adjusted earnings came in at 36 cents per share, beating the Zacks Consensus Estimate of 33 cents by 9.1%. The reported figure also increased 5.9% year over year from 34 cents per share registered a year ago.

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