Earlier this week, Jacobs Engineering Group Inc. (JEC) received a contract from Sasol, an integrated oil, gas and chemical company operating worldwide, to provide basic engineering services for the first commercial installation of Sasol’s proprietary tetramerization technology. However, Jacobs did not disclose the contract value.
 
The location for the first unit has not been determined, however Sasol’s chemical complex, located near Lake Charles, La., is a leading candidate. The basic engineering phase is expected to be completed by the third quarter of fiscal 2010. Construction is intended to begin in 2011 with the initial production scheduled in 2013.
 
With annual revenues exceeding $12 billion, Jacobs is one of the world’s largest and most diversified providers of technical, professional and construction services. Its major competitors are Foster Wheeler AG (FWLT) and Fluor Corp. (FLR).
 
Jacobs is among those infrastructure stocks that may benefit from the coming construction boom. Looking ahead, as banks get healthy and are willing to lend and should there be another round of stimulus, investors can expect infrastructure projects to increase.
 
Jacobs’ cost control initiative helps to deliver superior technical, professional, and construction services safely, efficiently, and within the cost and time parameters of the clients. Moreover, Jacobs’ ongoing acquisition strategy will help to strengthen its position in future.
 
Looking ahead, management expects full-year 2010 earnings per share to be in the range of $2.00 to $2.60. Jacobs’ diversification in terms of markets, geography and services will continue to facilitate future growth.
 
However, the very cyclical nature of its business and its heavy dependence on third parties are discouraging. Thus, we maintain an Underperform rating on the stock.
Read the full analyst report on “JEC”
Read the full analyst report on “FWLT”
Read the full analyst report on “FLR”
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