Although the share price of Jacobs Engineering Group Inc. (JEC) fell 7.4% since its second quarter earnings release on April 26, analysts have raised their estimates based on increased guidance provided by management, from the range of $2.00-$2.60 to the range of $2.15-$2.65.
Second Quarter Highlights
Jacobs’ second quarter earnings for fiscal year 2010 were $77.5 million, down from $109.3 million in the year-ago quarter. EPS was 62 cents compared with 88 cents in the second quarter of the previous year. However, reported EPS surpassed the Zacks Consensus Estimate of 58 cents.
During the quarter, total revenues declined 13.1% year over year to $2.587.0 million from $2,975.5 million during the same period of fiscal 2009. The decline was attributable to a sluggish economic environment.
(Read our full coverage on this earnings report: Jacobs Raises 2010 Guidance)
Agreement of Analysts
Upward movement in the 2010 EPS guidance and Jacobs’ track record of contract wins has encouraged analysts to raise their estimates. Further, Jacobs’ high level of liquidity, with a net cash of $743 million, will help sustain these difficult market conditions. Thus, for the current year, out of 21 analysts covering the stock, 18 moved in the positive direction with none going the opposite way.
For the following year also, the majority of analysts remains optimistic with 13 raising estimates and only 3 lowering them.
Magnitude of Estimate Revisions
The optimistic view of the analysts helped raise the Zacks Consensus EPS estimate for the current year by 8 cents to $2.46 in the last month. For the next year, the estimate has gone up to $2.74 from $2.66 earlier. Thus, despite the decrease in estimates in relation to 2009, the trend looks promising based on the hope of improved economic conditions in the near term.
Jacobs Stays Neutral
Jacobs’s new contract wins and cost control measures will help it perform well in the future. Jacobs also has a solid liquidity position. Jacobs’ ongoing acquisition strategy will help strengthen its position in the future.
However, the cyclical nature of its business, which is subject to significant fluctuations stemming from a variety of uncontrollable factors, will hinder further a upgrade of the stock. The company also faces immense risks as it operates in a highly-competitive environment. Thus, we reiterate our Neutral recommendation on the stock. This is supported by a Zacks #3 Rank (Hold).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “JEC”
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