Jacobs Engineering Group Inc.

 

 

Jacobs is one of the largest construction services firms providing a comprehensive suite of services encompassing engineering and construction, architecture, facilities operations and maintenance, and scientific and specialty consulting over a broad array of market segments.  In 2017 Jacobs implemented an efficiency initiative to improve effectiveness and reduce cost, coupled with the recent acquisition of CH2M and acceleration in end-market demand, we are starting to see growth and improved execution and profitability.  

 

Ests:     2Q24   3Q24   FY24    FY25

Revs    4.3b     4.4       16.4     17.7

EPS      1.86     2.02     8.09     9.19

                                   

 

P=149.08, div=1.16, yield=0.8%, D/C=22.7%, TTM EPS 7.25, P/E=20.5X, FY25 P/E=16X

 

2Q24   1.91 vs 1.74 ex .32 tax benefit last year, est 1.86 up from 1.83

  • May 7, 2024, P=149.08, TTM EPS=7.25, P/E=20.5X, FY25 P/E=16X

  • Revs +4.7% to 4.3bn, Net Revs +2.9% to 3.47bn, GM 26% vs 26.4%, OM 11.3% vs 10.6%, adj OpInc +9.9%

  • CMS +3.2% to 1.2bn OM 8.4% vs 7.9%, P&P Net +5.6% to 1.75bn OM 15.3% vs 14%, Divergent -11.4% to 198.3m OM 9.6% vs 11.1%, PA Consult -2.3% to 293.9m OM 20.5% vs 21.8%

  • OpInc growth driven by CMS +10% and P&P +15% although Divergent adj OpInc would be +13% ex a large license sale to Palentir last year

  • Backlog +1.5% to 29.4bn, OCF (42.8m) vs 132.0m

  • FY24 Outlook: Narrowed EBITDA 1.54-1.585bn, adj EPS 7.80-8.10

  • On track to separate CMS in 4Q.

1Q24   1.62 vs 1.67, est 1.51 ex .40 net tax benefit

  • Feb 6, 2024, P=137.06, TTM EPS=7.15, P/E=19X, FY24 P/E=17X

  • Raised dividend 11.5% to 1.16, 0.8% yield

  • Revs +9.5% to 4.2bn, Net Revs +7% to 3.3bn, adj EBT -2.6% to 283.6m, 8.6% vs 9.5%

  • People & Places Net Revs +8.4% to 1.6bn

  • Backlog +4.7% to 29.6bn

  • Reiterated FY24 Outlook, expect spin off CMS and Cyber Intelligence in 2H24

  

4Q23   1.90 vs 1.80, FY23 EPS +4% to 7.20

  • Nov 21, 2023, P=136.98, TTM EPS=7.20, P/E=19X

  • Revs +10.5% to 4.3bn, +7.3% ex fx, Net Revs +8.9% to 3.47bn, EBITDA +9% to 383.8m (11.1% vs 11%), adj EBT +8.3% to 342.9m, 9.9% vs 9.9%

  • CMS Revs +6.9% to 1.2bn, People & Places Net Revs +10.5% to 1.7bn

  • Backlog +4% to 29.1bn

  • Spinning off Critical Mission Solutions and Cyber Intelligence Business and merging it with Amentum

  • FY24 Outlook: EBITDA +9% to 1.53-1.6bn, adj EPS +10% to 7.70-8.20

1Q20   1.27 vs 0.93 +37%, est 1.19 down from 1.23

  • Feb 4, 2020, P=93.04, TTM EPS 5.20, P/E=18X, FY20 P/E=17X

  • EPS ex (.06) extra tax expense vs .07 benefit (TR 24% excluding extra expense)

  • Gross Revs +9% to 3.4bn, Net Revs +5%, GM 24.2% vs 23.7%, OM 8.9% vs 7.7%, OpInc +27.5%

  • Critical Mission +14% to 1.18bn, OM 7.6% vs 7%, People & Places Solutions Net +7% to 1.48bn, OM 12.1% vs 11.6%

  • FY20 Outlook maintained, adj EPS 5.30-5.80

  • Solid results continue, results continue to be superior to its valuation.

  • Increased share repurchase authorization by $1bn to 1.4bn, mgmt. feels shares are below their intrinsic value and they expect to fully use the authorization “over time” while being opportunistic.

  • Mgmt sees significant opportunities for the business. 

Mid-quarter update – Jan 16, 2019

  • Raised dividend 12% to .76, yield 0.8%

  • Backlog 22.7bn

  • FY20 Guidance maintained

4Q19   1.48 vs 1.14 +29%, est 1.32, FY19 EPS +30% to 5.05

  • Nov 25, 2019, P=93.38, TTM EPS=5.05, P/E=18X, FY20 P/E=17X

  • Gross Revs +13% to3.39bn, Net Revs +15% to 2.69bn, B/B>1.1, OM 9.4% vs 9.4%, OpInc +14.6%

  • Critical Mission +21.6% to 1.3bn, OM 6.7% vs 6.8%, People & Places Solution +9.3% to 1.39bn, OM 14.3% vs 12%

  • Backlog 22.6bn vs 19.96bn last year but does not include options or value beyond 2 years. 

  • Launching new brand and corporate identity to Jacobs Solutions Inc, ticker changing to J on Dec 10th.  Increasing focus on high-value segments, solving sustainable infrastructure challenges, focusing on technology-enabled delivery. 

  • Guidance: FY20 adj EBITDA 1.05-1.15bn vs 981.3m in FY19, +7-17%, adj EPS 5.30-5.80

  • Solid results and execution, valuation at 18X TTM EPS is more normal but solid growth ahead, hitting FY21 earnings targets ($7-8) would make this an attractive stock. 

Mid Quarter Update – Aug 20, 2019

  • Acquiring UK-based Wood Nuclear from John Wood Group for ~$300m, expected EV/EBITDA 7.9X assuming $12m in cost savings. 

  • Enhances Jacobs’ Nuclear offerings and unlocks organic growth opportunities with higher-margin solutions

  • Expect EPS accretion of .10-.12 within first 12 months.

  • Expect closing by 2Q20

3Q19   1.33 vs 1.24 w/ 22.6% TR, company reported 1.40 adjusted, est 1.24

  • Aug 5, 2019, P=79.67, TTM EPS 4.66, P/E=17X, FY20 P/E=14X

  • Gross Revs +8% to 3.2bn, +11% organic, Net Revs +12% to 2.63bn, GM 23.8% vs 26%, OM 8.8% vs 9.5%, OpInc +4.3%

  • ATEN +13% to 1.16bn, OM 6.6% vs 6.8%, Gross BIAF +5.3% to 2bn, Net BIAF +11% to 1.48bn, OM 12.4% vs 12.3% on Net basis

  • Backlog +13% to 22.5bn, ATN +4% ex KeyW to 8.5bn, unfunded backlog is more than 40% larger than reported.  BIAF +10% to 14bn, pipeline strengthening.

  • Repurchased $350m of $1bn authorization 

  • FY19 Guidance: Raised adj EPS ex ECR to $4.75-5.00 (incl some tax benefits), expect 2020 ATN OMs to improve.

  • While net debt is $200m, expect to pay $400m in tax from sale of ECR

  • Decent results, story continues to unfold, stock is not expensive especially given their strengthening capabilities and opportunities.

2Q19   1.19 vs .87 +37%, est 1.20 down from 1.30

  • May 7, 2019, P=77.01, TTM EPS 4.57, P/E=17X, FY19 P/E=16X top end of mgmt. guidance

  • EPS net of .04 to non-controlling interests (NCI)

  • Gross Revs +7.7% to 3.1bn, Net Revs +8.7% to 2.46bn, GP +2%, net GM 24.9% vs 26.6%, adj OM 9% vs 7.7% on Net basis, adj OpInc +27% to 221.7m

  • ATEN +14.7% to 1.06bn, OM 7% vs 5.7%, Gross BIAF +4.4% to 2.03bn, Net BIAF +4.6% to 1.4bn, 12.3% vs 10.8% on Net basis.  

  • Backlog +8% to 20.7bn

  • FY19 Guidance raised ex ECR EPS 4.45-4.85, EBITDA unchanged.  

  • Closed sale of ECR on Apr 26.  

  • Changing presentation of BIAF to revs on Gross and Net basis, the difference being pass-through costs previously in direct costs, doesn’t impact Gross Profit or Operating Income in absolute terms, looking at margins on a net basis makes sense.  

  • Conference call comments to follow.

Mid Quarter Updates

  • April 22, 2019 – Agreed to acquire KeyW, a leading national security provider of advanced engineering and technology for the Intelligence and Cyber and Counterterrorism communities for $815m incl 272m $debt

  • Increases employees with Top Secret security clearance by 50%

  • Anticipate more than doubling KeyW’s 2018 adj EBITDA  by 2022, to contribute .25-.30 per share in EPS by 2020 (7% of FY19 Guidance), more of a longer-term capability move.

  • Feb 19, 2019 – Investor Day

  • Reaffirmed FY19 EPS Guidance including ECR of $5.10-5.50, ex ECR EPS 4.40-4.80, @ $70 low end of guidance is 16X, better than I was expecting but looks to exclude interest expense associated with debt to be repaid after closing and includes expected buybacks.  Expects EPS >$5.00 in 2020, 2021 earnings power could be $7-8 per share

  • 2021 Business objectives: Organic growth 3-5% CAGR, adj improvement in Net Operating Profit Margin +125-175bps, adj EBITDA growth double digit CAGR, ROIC +100-150bps

  • Business profile: Approx 60% BIAF, 40% ATN, 6% Fixed Price Construction, 94% Reimbursable Construction and Fixed Price Services, 2019-2020 Strategy includes exiting direct hire construction

 

Feb 20, 2019 - re-establishing position, company had its investor day, better clarity around EPS ex ECR, gave EPS guidance $4.40-4.80 so ~16X which seems reasonable.  Expects solid organic growth and improved profitability to 2021 with earnings power of $7-8 per share.  The company is de-emphasizing construction, currently 6% of the business is Fixed Price construction with the rest being cost plus construction and fixed price services, their 2021 strategy includes exiting direct hire construction.  The company feels they are uniquely positioned with in-house technology expertise.

Mid Quarter Update 

  • Feb 19, 2019 – Investor Day

  • Reaffirmed FY19 EPS Guidance including ECR of $5.10-5.50, ex ECR EPS 4.40-4.80, @ $70 low end of guidance is 16X, better than I was expecting but looks to exclude interest expense associated with debt to be repaid after closing and includes expected buybacks.  Expects EPS >$5.00 in 2020, 2021 earnings power could be $7-8 per share

  • 2021 Business objectives: Organic growth 3-5% CAGR, adj improvement in Net Operating Profit Margin +125-175bps, adj EBITDA growth double digit CAGR, ROIC +100-150bps

  • Business profile: Approx 60% BIAF, 40% ATN, 6% Fixed Price Construction, 94% Reimbursable Construction and Fixed Price Services, 2019-2020 Strategy includes exiting direct hire construction

1Q19   1.14 vs .77 +48%, est 1.07 down from 1.21

  • Feb 6, 2019, P=66.73, if FY19 EPS ex ECR is 3.18, P/E=21X

  • cont ops .78 vs .46, +70%, disc ops .41 vs .29

  • Revs ex ECR +73% to 3.1bn, +12% pro forma, OM incl corp exp, 5.2% vs 4.4%, OpInc +3.8%

  • Backlog +8% to 20.3bn, Debt 2.7bn, cash 887m, 

  • ATEN +46% to 1.0bn, OM 7% vs 8.6%, BIAF +91% to 2.05bn, OM 7.5% vs 6.2%

  • FY19 EPS 5.10-5.50 assuming full year of ECR which is not logical, continue to expect adj EBIT ex ECR of 920m-1bn

  • Investor Day Feb 19, 2019 to detail new strategy incl $1bn share repurchase.

Mid Quarter update

  • Raised dividend 13% to 0.68, 1% yield

  • Authorized to repurchase $1bn in stock over 3 years (roughly 11%)

 

4Q18   1.24 vs 0.98 ex .07 benefit, +26%, est 1.24 down from 1.28, FY18 4.25 vs 3.24 +31%

  • Nov 20, 2018, P=72.93, TTM EPS 4.25

  • Revs +56% to 4.1bn (est 3.96bn), +7% pro forma, GM 19.1% vs 17.9%, OM 6.7% vs 5.4%, OpInc +95%

  • ATEN +19% pro forma to 1.3bn, OM 7.3% vs 8.7%, BIAF +1% pro forma (+8% for FY18) to 1.69bn, OM 8% vs 7.2%, ECR +15.8% to 1.16bn, OM 4.6% vs 4.1%

  • Expenses 2.8m vs 26m due to 15m benefit to ECR (9m benefit for FY)

  • Reduced debt by almost 200m to 2.2bn, Gross D/EBITDA 1.7X, net deb 1.4bn

  • Backlog ex ECR 20.2bn, flat q/q and +2-3% y/y pro forma

  • 1Q19 Guidance: EPS 0.85-1.15 incl ECR (vs .77, est 1.21), will continue to provide quarterly guidance including ECR until it closes (why not discontinued ops?)

  • FY19 Guidance ex ECR: EBITDA 920m-1bn, would be 1.2bn net cash after sale of ECR but incl 700m of shares in WorleyParsons so more conservative measure would be 800m. FY18 EBITDA probably 1.2bn but difficult to say at this point without full financials, expect solid rev growth in FY19 but probably in single digits, think 8% FY pro forma growth for BIAF is a good representation for next year, ATEN probably in single digits also.

  • If they don’t repay debt and have a 20% tax rate with 9m in NCI, EPS could be 3.18 (3.71 if they repay debt) assuming no share reductions puts the stock at 23X EPS or 20X if they repay the debt.  Stock got hit 11% but still would be 20X adjusted EPS with mgmt. comments of slower growth in FY19.

Nov 8, 2018 Exited Position as stock has hit new highs putting it at ~24X its current earnings power excluding the ECR business. Not certain what that would mean for FY19 guidance but I’d still expect solid growth but it feels more fully valued especially compared to other names that have still been hit hard.

 

Mid Quarter Update

  • Oct 21, 2018

  • To sell Energy Chemicals and Resources (ECR) business for $3.3bn, (2.6bn in cash, 700m in stock of WorleyParsons) narrows focus on higher margin growth business and significantly reduces cyclicality.

  • Sale price is >11.5X TTM adj EBITDA (roughly in line with JEC currently).

  • For 9M18, EBT ex E&C would be 29% lower, if they could fully retire the debt EBT would be 21% lower but they won’t be able to fully retire it.  If FY18 EPS is 4.40, 75% of that would be $3.30 putting the stock at 24X trailing EPS, difficult to pin down what FY19 Guidance would be.   

3Q18   1.35 vs .79, +71%, ex (.30) acquisition/restructuring, est 1.21

  • August 6, 2018 P=67.09, TTM EPS=4.19, P/E=16X, FY19 P/E=13X

  • Revs +14% pro forma to 4.2bn, GM 18.7% vs 18.3%, OM 6.4% vs 5.5%

  • Aerospace, Tech, Enviro & Nuc 1.2bn, OM 7.3% vs 8.1%, Buildings, Infrastructure, & Advanced Facilities 1.71bn, OM 8.5% vs 7.4%, Energy, Chems, and Resources 1.2bn, OM 5% vs 5%

  • Bookings 4.7bn, B/B=1.2, Backlog 27.2bn,

  • Reduced debt to 1.9X to adj EBITDA, within their long-term range but remain focused on reducing it further, will likely look at increasing dividend/share repurchases.

  • Seeing pipeline in Life Sciences build due to U.S. tax cuts

  • FY Guidance: Raised EPS to high end of previous ranged 4.00-4.40, initiating FY19 Guidance for EPS 5.00-5.40 (est 5.03)

  • Results continue to be solid, stock responded well and still looks cheap.

2Q18   1.09 vs 0.73, ex (.09) legal expense vs .05 benefit, est .88 up from .72

  • Revs +16% pro forma to 3.9bn, GM 19.7% vs 19.1%, ex 17.3m legal charge OM 6.0% vs 6.1% but ex corp exp 6.9% 6.46%, solid double digit organic growth in Jacobs and CH2M

  • Aerospace, Tech, Enviro & Nuc 1.1bn, ex 17.3m legal charge OM 7.1% vs 7.4%, Buildings, Infrastructure, & Advanced Facilities 1.76bn, OM 7.8% vs 7.1%, Energy, Chems & Resources 1.07bn, OM 5.3% vs 5.1%

  • Seeing acceleration in end market demand, government spending priorities such as DoD, EoE, NASA, water, and commercial market investment cycle such as 5G Wireless build-out, technology, and automotive.

  • Book/Bill=1.1, Backlog 26.5bn, +9% y/y pro forma, still ~400m of awards under protest.

  • Mgmt confident in ability to significantly reduce debt (balance sheet is already solid).

  • Guidance: Raised FY18 EPS to 4.00-4.40, expect solid y/y rev growth in 2H but not at 2Q rate. Confident of 50m cost savings by end of FY18 and 150m run rate by end of FY19.

1Q18   .77 vs .68, est .72

  • Revs +7.8% to 2.75bn (includes 2 weeks from CH2), GM 17.7% vs 16.4%, OM 4.9% vs 4.7%

  • Had organic growth, double digit organic growth in prof. services

  • Backlog 26.2bn due to CH2M, JEC only backlog slightly down q/q, since quarter end they have won some deals that were under protest, still 850m under protest.

  • Seeing continued momentum in Aerospace & Technology and Buildings & Infrastructure, improving trends in Energy and Mining & Materials.

  • CH2M’s backlog has materially higher GMs than JEC.

  • Guidance: FY18 EPS 3.85-4.25 up from 3.55-3.95

4Q17   .98 vs .77, ex .20 items vs .53, est .82  FY17 3.24

  • Revs +0.5% to 2.65bn, GM 17.9% vs 16.3%, OM 5.9% vs 4.9%

  • Backlog 19.8bn, solid increase in aerospace and tech, CH2M acquisition set to close mid-December

  • Mgmt recapped changes including improving transparency and accountability, incentive metrics focused on increasing profitability, driving growth, generating cash flow, driving higher returns on capital, focus on operational execution

  • Guidance: FY18 EPS 3.25-3.60 plus additional .30-.35 from CH2M with 15% accretion within 12m from closing.

3Q17   .79 vs .78 ex .05 restructuring, est .78 down from .81

  • Announced acquisition of CH2M for 3.3bn, EPS includes .02 in costs for CH2M

  • Revs -6.6% to 2.51bn, GM 18.3% vs 16.8%, OM 5.5% vs 5.3%

  • Backlog 18.6bn, mgmt. focused on winning higher value work

  • Major attraction of CH2M is its water capability

  • Guidance: FY17 EPS 3.00-3.15 incl .07 costs for CH2M acquisition

2Q17   .72 vs .75, ex .37 restructuring and .06 benefit, est .72

  • Revs -17% to 2.3bn, OM ex 9.9m benefit 5.6% vs 4.4% (OpInc +6.8%, EBT -1.6% due to 6,4m other expense vs 3.7m income last year)

  • Aero+tech -14%, OM 7.8% vs 8.2%, Buildings and Infrastructure +3.6%, OM 7.5% vs 7.3%, Industrial -12.6%, OM 4.1% vs 1.9%, Petro&Chem -56%, ex 9.9m benefit, OM 4.6% vs 3.6%

  • Backlog 18.5bn, +307m q/q, +247m y/y

  • Adj OpInc improved y/y for the first time in 3 years due to their restructuring efforts

  • Guidance: management still sees FY17 adj EPS 3.00-3.30