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Jacobs to Provide Program Management Services, Boost Backlog

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Jacobs Engineering Group Inc.’s (JEC - Free Report) increased focus on high-value businesses and efficient project execution has been driving its performance over the last few quarters. The company’s contract wining spree positions it well for the future. Particularly, the Buildings, Infrastructure and Advanced Facilities (“BIAF”) business (which accounted for 63.5% of total third-quarter fiscal 2019 revenues) has been rallying lately on the back of solid backlog.

Recently, the BIAF unit was selected by San Miguel Corporation (“SMC”) to provide program management consultation services for the latter’s New Manila International Airport (“NMIA”) project located in Bulacan, Philippines.

Jacobs will be delivering services during planning, design and construction phases of the project that include project scoping and management, contract development, strategic advisory, design management, scheduling, and financial planning.

Notably, the contract win proves its expertise in delivering aviation design and program management experience to a sustainable and world-class aviation hub that will provide better livelihood opportunities.

Impressive Fundamentals Drive Growth

In the fiscal third quarter, the company delivered solid top and bottom-line performance, backed by healthy segmental businesses and the KeyW acquisition. Notably, backlog as of Jun 28, 2019 grew 8% year over year. Also, accelerated CH2M cost savings and prudent strategy execution added to the positives.

Encouragingly, the company lifted its earnings and adjusted EBITDA guidance for fiscal 2019, given continuous innovation, solid project execution and diversification into new high-margin growth opportunities. It expects pro-forma EPS in the range of $4.75-$5.00. Also, it increased the lower end of the adjusted EBITDA guided range to $0.965-$1 billion from $0.92-$1 billion expected earlier.

Meanwhile, management has outlined new margin targets for the next three years (through 2021). It projects 125-175 bps expansion in adjusted operating margins driven by a combination of higher-margin backlog, and focus on generating efficiencies through digital and technological solutions.

The company is projecting 3-5% net organic revenue growth, with BIAF leading the way with 4-6% top-line CAGR and ATN with 2-3% CAGR.

The global engineering, procurement and construction industry is highly fragmented and faces intense competition. Jacobs, a leading provider of professional, technical and construction services, together with AECOM (ACM - Free Report) , KBR, Inc. (KBR - Free Report) and Fluor Corporation (FLR - Free Report) witness excessive contract pricing pressure. Poor competency or business inefficiencies in the long run might diminish Jacobs’ market share and profitability from such business fragments. Nonetheless, regular contract wins and solid view are encouraging.

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