Jacobs Engineering Group (JEC), like many global engineering firms, is on a teeter-totter of growth versus contraction. While it has worked to expand through acquisitions into new areas, much depends on the ability of its private and public clients to finance major new project work.
Jacobs Engineering Group offers a diverse range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world.
Its clients operate in areas such as oil and gas, government, aerospace, defense, environmental, chemicals and polymers, mining and minerals, pharmaceuticals and biotech, infrastructure, commercial construction, power, pulp and paper, technology and manufacturing, food production and others.
“Our relationship-based business model is a significant driver of our acquisition strategy,” Jacobs management said in a recent filing. “When we review potential acquisition targets, we are conscious of the effect the acquisition may have on our client base. We favor acquisitions that allow us to expand or enhance the range of services we provide existing clients, and/or gain access to new geographic areas in which our clients either already operate or plan to expand.”
Among recent acquisitions was a 55 percent interest in Consulting Engineering Services, a power, infrastructure, and civil engineering company headquartered in Delhi, India, and Aker Solutions’ Process and Construction business, a 4,500-person operating unit serving the oil, gas, and refining markets, as well as mining and minerals, chemicals, energy and environmental industries.
Jacobs Engineering Group has a market cap of $4.77 billion in a sector, construction and engineering, where the average company size is $781.34 billion. Its trailing 12-month P/E ratio is 13.20 and its five-year projected price-to-earnings-growth (PEG) ratio is 1, compared to 1.16 for the sector.
Its projected earnings per share growth for the coming year is 15.52 percent, compared to a sector average of 42.82 percent.
Analysts are divided on Jacobs Engineering. Stifel Nicolaus and Friedman, Billings, Ramsey & Co. have positive ratings on the stock, while most are neutral or have the share as a hold.
“Jacobs Engineering is well poised to make the most of a booming infrastructure business supported by its low-cost position relative to peers. The company’s growing international exposure through contract wins and diversification across markets, geographies and services looks impressive,” said Zacks Investment Research analysts in mid-April, reiterating a neutral rating on the shares.
“However, dependence on a few major customers and third-party equipment suppliers may thwart stock performance. In addition, rising construction cost and labor availability issues are nagging concerns.”
Jacobs Engineering Group next reports on April 30, 2013.
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