Jacobs Engineering Group Inc. (JEC) has recently won a $103.3 million contract from the U.S. Air Force for providing support work at the Eglin Air Force Base in Florida.
Jacobs has so far received a total of 9 contracts in August 2010. This continuous inflow of contracts will definitely pull Jacobs out of the current sluggish environment.
New contract wins are also expected to improve backlog, which has been continuously shrinking since the beginning of fiscal 2010. During the first quarter of fiscal 2010, backlog reduced to $14.9 billion from $16.0 billion in the previous quarter. In the second quarter, it reduced to $14.7 billion, and finally in the third quarter to $13.5 billion.
Another positive factor for the company is its robust liquidity position with a net cash position of $847.6 million at the end of third quarter of fiscal 2010.
Jacobs’ diversification across markets, geographical regions and services will also help it to generate growth. The company plans to expand into the emerging markets such as India, China and the Middle East, which are expected to perform much better than the developed markets in the coming years. Moreover, Jacobs’ ongoing acquisition strategy will help it to emerge stronger.
Jacobs’ business is cyclical in nature due to a wide variety of uncontrollable factors, including economic conditions and changes in client spending, particularly during periods of economic uncertainty. However, the market is recovering gradually, which is expected to push Jacobs ahead in the future.
Thus, we reiterate our long-term Neutral recommendation on the stock. Currently, the stock retains its short-term Hold rating, equivalent to a Zacks #3 Rank.
JACOBS ENGIN GR (JEC): Free Stock Analysis Report
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