Morningstar | JEC Updated Forecasts and Estimates from 27 Nov 2018
We are maintaining our $75 fair value estimate for no-moat engineering and construction firm Jacobs after the company announced fourth-quarter results that beat consensus expectations on earnings but missed on revenue. The company posted a GAAP loss of $0.16 per share in the fourth quarter largely due to charges related to its December 2017 CH2M acquisition as well as the revaluation of certain deferred tax assets and liabilities associated with U.S. tax reform. Excluding those charges, adjusted fourth-quarter EPS of $1.31 was 34% higher versus the same period last year.Fourth-quarter core revenue grew 7% year over year, fueled by strong 19% growth in the energy, chemicals, and resources segment and 14% growth in the aerospace, technology, environmental, and nuclear segment. Building, infrastructure, and advanced facilities sales grew 5% year over year. Additionally, the company’s 6.8% adjusted operating margin was 130 basis points higher compared with the same prior-year period.
The company announced that synergies from the CH2M acquisition reached $85 million in fiscal 2018, exceeding management’s previous $75 million target. Management now expects annual run-rate cost savings to reach roughly $175 million toward the end of fiscal 2019. We think that the CH2M acquisition, coupled with the recent sale of the energy, chemicals, and resources business to WorleyParsons (expected to close in the first half of calendar 2019), will result in a less cyclical portfolio with lower exposure to commodity markets.
Jacobs Engineering Group provides services including consulting, technical, scientific and project delivery for the government and private sector. The company's lines of business are: Critical Mission Solutions, which provides cybersecurity, data analytics, software application development, enterprise and mission information technology, systems integration and other technical consulting solutions to government agencies as well as aerospace, automotive and telecom customers; and People and Places Solutions, which provides end-to-end solutions for its clients' projects, whether connected mobility, water, smart cities, manufacturing or the environment.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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