Now Is the Time to Consider Jacobs Engineering Group

Usually when we think of infrastructure, visions of bridges, tunnels, buildings, industrial plants, come to mind. When talk turns to energy we think of oil, natural gas, coal, and nuclear power.

Yet the two are inexorably linked together: you need good infrastructure to move energy around, and you can’t create the infrastructure without good sources of cheap energy.

As the world continues – albeit ever so slowly – to wean itself off fossil fuels in favor of greener sources of energy, the two are increasingly talked about in the same conversation.

And for good reason… there’s much new “energy infrastructure” that needs to be created:

• Higher capacity transmission lines to move mid-west wind generated power to densely populated, energy-hungry coastal areas.
• Bigger pipelines to move natural gas from distant places like the north slope of Alaska and Canada to the lower 48 states.
• Storage facilities for both oil and natural gas.
• Liquid Natural Gas terminal facilities both here and abroad.

These are all huge, complicated, expensive projects that take years to build. But before the first shovelful of dirt is turned, detailed designs down to the last nut, bolt and washer have to be created.

In some cases, pilot plants or small systems are engineered and built as proof of concept for new plant designs. And since the end result is only as good as the design construction company behind it, large firms with the depth and breadth of experience are usually tapped to pull these types of projects together.

One company that’s been doing it for years is Jacobs Engineering Group, Inc. (JEC), one of the world’s biggest technical, professional and construction service companies.

With annual revenues exceeding $12 billion, Jacobs provides project services including design, engineering and architectural services. It also provides consulting services for process and scientific systems.

Its construction services include traditional industrial and commercial construction services, as well as construction management and operations and maintenance services to operate large, complex factories and plants on behalf of the owners.

In the energy and infrastructure field, Jacobs has over 100 years of experience in the gasification and carbon-capture technologies, electrical transmission systems, and power and switching plants.

The company is active in the development of renewable energy projects, including wind farms, tidal power, hydro-power, tidal stream and waste energy plants.

From offshore platforms to gas storage, Jacobs has designed it, built it, managed it and operated it.

As the Obama administration’s economic stimulus dollars begin to flow into the energy and infrastructure space, I expect Jacobs to be a direct beneficiary. And since it is involved in the design phases of new projects, it should see a financial benefit long before the construction gets underway.

Now is a perfect time to consider investing in Jacobs, as the stock is down nearly 80% from its 52-week high – reached last year. Investors who want exposure in the energy and infrastructure sectors would be wise to consider a solid player like Jacobs Engineering Group.

Good investing.

Comments

[Alan Young:]

Fine, but can you explain why you would favor Jacobs over similar engineering firms such as McDermott, Vinci, ACS, URS, Bouygues, or especially Quanta [PWR], which specializes in power lines?

Jun 27 01:41 PM

[Old Trader:]

Alan,

If I'm not mistaken, Jacobs tends to build "relationships" with their clients, which tends to differentiate firms that do fixed contract/low bidder work, such as McDermott (I'm not overly familar with the others you cite, beyond name recognition). Secondly, as the article points out, Jacobs is not a "one trick pony", having a lot of experience in just about all of the areas that would benefit from any infrastructure build-out.

Another I've been watching is Worley Parsons, an Aussie-based design/build firm. Unfortunately, its almost doubled in price from the March lows. JEC is one I've been watching, off and one, for about 18 months.

Full disclosure: no positions in any securities mentioned in either the article, or above comments.


On Jun 27 01:41 PM Alan Young wrote:

> Fine, but can you explain why you would favor Jacobs over similar
> engineering firms such as McDermott, Vinci, ACS, URS, Bouygues, or
> especially Quanta [PWR], which specializes in power lines?

Jun 27 03:26 PM

[Sovestor:]

Maybe it is good. But this does not mean it is cheap. More research and insight are needed.

Jun 27 08:30 PM

[Robert A. W...:]

We can provide the fundamental analysis on Jacobs Engineering:marketblog.wordpress.c.../
Dave's macroeconomic themes are corroborated by the numbers. JEC looks like a good bet for the long term.

Jun 28 07:38 PM

[jarco:]

Not sure JEC is the best play. While big and somewhat diversified, too much into Canadian Oil Shale. Unless crude stays above $55, that monster of a project wiill tread water. I prefer ACM and URS. The latter is 8% below its year high and 143% above its low. ACM has similar but slightly lower numbers.

Sector upside still looks very good stimulus problems and sluggish economy notwithstanding. Low risk in my view. Good cash and low debt avoiding ongoing and still not resolved financing problems

Jul 20 03:43 PM