Jacobs Engineering Downgraded At UBS, Says Co. Executing Well

UBS cut Jacobs Engineering Group Inc JEC to Neutral from Buy on valuation, organic growth restrained by lack of customer confidence and near-term uncertainty on an arbitration case.

That said, the brokerage acknowledged the company's execution in its turnaround phase that resulted in margin improvement despite weak revenue environment.

"The market multiple has expanded, and we think JEC's improving cash flow, solid execution, and cost cutting warrant a premium valuation, but we think further upside could be more limited going forward," analyst Steven Fisher wrote in a note.

"The 13.5x average FY2 P/E multiple implies forward EPS of $4.00/sh. Given the downturn in oil prices, competitive pig pressures and uncertainty in government spending, we think $4.00 of EPS could be beyond FY18," Fisher added.

In addition, in late September, Jacobs Engineering is expected to begin hearings on the $8 billion. The company doesn't expect a material negative impact, but JEC also did rule one out.

Fisher raised his price target to $56 from $53 to reflect strong performance on the company's turnaround and expansion in equity market valuation multiples.

At time of writing, shares of Jacobs Engineering fell 1.48 percent to $54.76.