KeyBanc Likes Jacobs Engineering After Q3 Beat, Continued Momentum

Jacobs Engineering Group Inc JEC reported its third-quarter earnings higher than expectations. The company generated strong revenue growth in both segments and there’s upside potential to the current 2020 and 2021 estimates, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Tahira Afzal maintained an Overweight rating on Jacobs Engineering Group while keeping the price target at $90.

The Thesis

Jacobs Engineering Group recorded organic revenue growth of 11% in the third quarter, beating KeyBanc’s topline forecast by around 6%, Afzal said in the note.

Management commentary inspired greater confidence of the company being able to maintain organic top-line growth in the 3-5% range through 2021, Afzal mentioned.

While raising the 2020 and 2021 revenue estimates by 142 bps and 75 bps, respectively, the analyst noted that the strong backlog pipeline in ATN and BIAF offer upside to these forecasts. He also raised the EPS estimate for 2019 from $4.63 to $4.88.

The ATN segment continues to have exposure to large contract awards from NASA/DoD and could also benefit from the integration of the KeyW acquisition. Referring to the BIAF segment, Afzal said that in the event of a macro slowdown, Jacobs Engineering Group’s technologically advantaged strategy and more resistant-end markets “should put it in a relative area of strength vs. peers.”

Price Action

Shares of Jacobs Engineering Group traded 3% higher to $83.55 at time of publishing on Tuesday.

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