Jacob's Strong Quarter and Rally: New Variations on Bullish Infrastructure Theme

Nov. 7.07 | About: Jacobs Engineering (JEC)

On Tuesday, Jacobs Engineering (NYSE:JEC) rallied 4% in early trading on yet another solid hit in the infrastructure group. Some color on their earnings:

  • Backlog increased a whopping 39%, or $3.8 Billion to $13.6 Billion. (this is almost 2 years worth of business!)
  • Yearly Net Earnings increased 46% year over year; Yearly EPS up 43% year over year
  • Quarterly Net Earnings increased 43% year over year; Quarterly EPS up 39%
  • Jacobs reported today record net earnings of $287.1 million, or $2.35 per diluted share, on revenues of $8.5 billion for its fiscal year ended September 30, 2007. This compares to net earnings of $196.9 million, or $1.64 per diluted share, on revenues of $7.4 billion for fiscal 2006.
  • For the fourth quarter of fiscal 2007, Jacobs reported net earnings of $83.9 million, or $0.68 per diluted share, on revenues of $2.3 billion. This compares to net earnings of $58.7 million, or $0.49 per diluted share, on revenues of $2.0 billion for the fourth quarter of fiscal 2006.
  • Jacobs also announced backlog totaling $13.6 billion at September 30, 2007, including a technical professional services component of $6.2 billion. This compares to total backlog and technical professional services backlog of $9.8 billion and $5.2 billion, respectively, at September 30, 2006. During the current quarter, the Company booked an additional $1.9 billion relating to the previously-announced refinery expansion project for Motiva Enterprises LLC.
  • Commenting on the results for the year, Jacobs President and CEO Craig L. Martin stated, "The fourth quarter was another good one for us, capping what was an excellent year. Our team did an outstanding job delivering on the promise of a strong market. We enter Fiscal Year 2008 with record backlog and a robust prospect list. The outlook for next year is good."
  • Commenting on the Company's earnings outlook for fiscal 2008, Jacobs Chief Financial Officer John W. Prosser, Jr. stated, "The outlook for 2008 should continue to track above our target 15% average growth. Our initial guidance for 2008 earnings per share is a range of $2.70 to $3.10."

Analysts were in for $2.23B and $0.65 EPS; so a solid beat on both ends. Analysts had pegged $2.85 for 2008 estimates, so this new guidance of $2.70 to $3.10 should have analysts scrambling to push up estimates for next year.

Considering Jacobs has been beating estimates guidance by 7% a quarter for most of the year I will project 2008 coming in somewhere in the $3.20s. At $88, this gives the stock a forward P/E of 27.5 Certainly not cheap but how many companies/industries in this environment have such visibility to future revenues. Less and less by the week as we enter a slowing domestic economy and one could argue (eventual) slowing international economy in 2008.

Long Jacobs Engineering in fund; no personal position.

JEC 1-year stock chart