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Jacobs Wins $166M Federal Aviation Administration Contract

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Jacobs Engineering Group Inc. (J - Free Report) has won a $166 million indefinite delivery, indefinite quantity (IDIQ) contract from the Federal Aviation Administration (“FAA”) to provide architect and engineering design services.

Per the deal, the company’s Federal & Environmental Solutions business will help the FAA to modernize and sustain more than 13,000 facilities, which support the National Air Space or NAS. This nine-year contract has a five-year base period and two option periods of two years at the FAA's discretion.

Strong Relationship With FAA Fortifies Jacobs’ Business

Over the past 26 years, Jacobs has been supporting the FAA to deliver on its mission of providing the safest aerospace system in the world. So far, it has provided three million technical service hours to the FAA, while maintaining the continuity of operations and avoiding a project-related shutdown.

Notably, Jacobs has designed a new greenfield mission-critical facility and upgraded the existing ones in the past two years to support the FAA's Next Generation Air Transportation System modernization program. The said mission is one of the most ambitious infrastructure programs in the U.S. history. The agency is halfway through the multi-year investment and implementation plan that will aid the National Airspace System’s modernization and security.

Solid Project Execution to Support Long-Term Prospects

Jacobs registered stellar growth in first-half fiscal 2020, driven by healthy segmental businesses, acquisitions, cost savings and a prudent project execution strategy. Overall, the company has a robust pipeline of opportunities across all businesses, as it has started to realize synergies from CH2M and KeyW buyouts.

Solid project execution has been one of the main characteristics driving its performance over the last few quarters. The company ended fiscal second quarter with a backlog of $23.3 billion, which reflects an increase of 12.5% year over year (up 5% on a pro-forma basis).

Although the current market scenario remains unpredictable owing to COVID-19, the company’s long-term outlook for the business remains intact. It is projecting 3-5% net organic revenue growth through 2021. The top-line growth is expected to be driven by recurring revenues that roughly occupy two-thirds of Jacobs’ total revenues, in turn reducing overall risks of market volatility. Also, it aims a 125-175 basis-point expansion in adjusted operating margins in the long run. The margin expansion is expected to be driven by a combination of higher-margin backlog, and focus on generating efficiencies through digital and technological solutions.

So far this year, the company’s shares have outperformed the industry. The recent contract win will further add to its bliss.

Zacks Rank

Jacobs — which shares space with Gates Industrial Corporation plc (GTES - Free Report) , Quanta Services, Inc. (PWR - Free Report) and AECOM (ACM - Free Report) in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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