Jacobs Misses on Q2 Earnings, Revs - Analyst Blog

Jacobs Engineering Group Inc. JEC reported lower-than-expected fiscal second-quarter 2014 (ended Mar 28, 2014) financial results wherein both earnings and revenues fell short of the Zacks Consensus Estimate.

The company reported second-quarter adjusted earnings per share of 82 cents, 2 cents higher than year-ago earnings of 80 cents. The quarterly earnings missed the Zacks Consensus Estimate of 89 cents by 7.9%.

The adjusted earnings excluded 24 cents loss related to certain issues in the European projects, along with Sinclair Knight Merz SKM acquisition related items and weather related issues. Also, it excluded a gain of 5 cents related to the sale of VCM technology assets.

Revenues: Revenues improved 12.0% year over year to $3.18 billion in the reported quarter, lower than the Zacks Consensus Estimate of $3.39 billion. The Technical Professional Services component's revenues came in at $1.87 billion, up from $1.69 billion in the year-ago quarter. The Field Services component's revenues were $1.30 billion, up from $1.14 billion reported in the second quarter of fiscal 2013.

Costs/Margin: In the reported quarter, direct costs of contracts, a major expenditure for Jacobs, climbed 12.2% from the year-ago quarter and settled at $2.66 billion. Selling, general and administrative expenses came in at $394.1 million, up 31.5% year over year.

In the quarter, operating margin reached 3.85%, declining 198 basis points year over year.

Backlog: Exiting the quarter, backlog stood at $18.4 billion, rising 9.7% from $16.8 billion in the year-ago quarter. It includes backlog from the Technical Professional Services component of $12.5 billion versus $10.9 billion at the end of the second quarter of fiscal 2013, with the remainder coming from the Field Services component.

Balance Sheet: Jacobs' cash and cash equivalents at the end of fiscal second-quarter 2014 were approximately $691.3 million, down from $1.01 billion recorded at the end of the previous quarter. Total debt at quarter-end decreased to $996.3 million, compared with $1.09 billion as of Dec 27, 2013.

Outlook: The results in the reported quarter were impacted by certain one-time items. However, the strength in the quarter is reflected in increased revenues and backlog. The company intends to reduce costs in Europe as well as through the integration of the SKM acquisition. Given the earnings decline, the company has lowered fiscal 2014 earnings per share expectations to $3.15–$3.55 range from $3.35–$3.90. 

Other Stocks to Consider

Jacobs currently carries a Zacks Rank #3 (Hold). Other stocks worth a watch in the industry include Pernix Group Inc (PRXG), Fluor Corporation FLR and Willdan Group, Inc. WLDN. While Pernix Group sports a Zacks Rank #1 (Strong Buy), Fluor and Willdan Group carry a Zacks Rank #2 (Buy).