Jacobs Engineering Group Inc. (JEC) has won a couple of contracts during the month of May. The latest was the contract from Cessna Spanish Citation Service Center, S.L., a division of Textron Inc. (TXT).
According to the contract, Jacobs will design and build a new Citation Service Center in Valencia, Spain. The construction is supposed to start by the beginning of 2011. However, the contract value was not disclosed by management.
Earlier this month, the company’s contract with United States Special Operations Command (USSOCOM) for acquisition, logistics, management, and business operations support (ALMBOS) got extended by $50 million.
Additionally, it received a contract from Chennai Petroleum Corporation Limited (CPCL) of India. Jacobs will be providing project management consultancy and engineering, procurement, construction management services for the upgrade of CPCL’s Resid Project.
Jacobs is one of the world’s largest and most diverse providers of technical, professional and construction services. Jacobs’ diversification across markets, geographies and services helps generate growth in the present sluggish environment.
The company plans to expand into emerging markets like India, China and the Middle East. Emerging markets are expected to perform much better than the developed markets in the coming years.
We believe that Jacobs’ track record of contract wins will help it to perform well in future. Another reason for the company to sustain in these difficult market conditions is its liquidity. The company has maintained a high level of liquidity, with a net cash position of $743 million from $240.4 million at the end of the first quarter of fiscal 2010.
For 2010, management has raised the EPS guidance from the range of $2.00 to $2.60 to the range of $2.15 to $2.65.
However, there are certain reasons that hinder a further upgrade of the stock. The company’s industry is very cyclical and is subject to significant fluctuations due to a wide variety of uncontrollable factors, including economic conditions and changes in client spending, particularly during periods of economic uncertainty. Thus, we reiterate our Neutral recommendation on the stock.
Read the full analyst report on “JEC”
Read the full analyst report on “TXT”
Zacks Investment Research
