Dive Brief:

• Jacobs Engineering Group reported $135.6 million in profits for its first fiscal quarter Tuesday, or $1.06 per share, up from $134 million a year ago. Revenue increased to $3.8 billion, up 12.4% from $3.38 billion 12 months earlier, as the company benefited from government stimulus in key infrastructure categories.
• Adjusted earnings per share from continuing operations hit $1.67, up 7% year-over-year, according to a press release. The results beat analysts’ expectations of both $3.61 billion in revenue and $1.61 per share, according to Zacks Investment Research.
• Jacobs reiterated its fiscal 2023 earnings-per-share outlook of $7.20-$7.50, which brackets the average analyst estimate of $7.39, according to Matt Arnold, industrial analyst with financial services firm Edward Jones.

Dive Insight:

Bob Pragada, newly appointed Jacobs CEO, identified critical infrastructure, energy and environment, advanced facilities and national security as key growth sectors for the company.

Those growth sectors continue to receive a boost from government stimulus, such as the Infrastructure Investment and Jobs Act, Inflation Reduction Act, CHIPS Act and supply chain technology investments, said Pragada. He added the company has helped its clients secure over $1 billion in IIJA competitive grants. That includes funding for projects such as subway station accessibility in New York City, a major port development in Alaska and the design of a sustainable battery recycling facility.

“Before the end of the calendar year, we fully expect to have all three bills firing at full strength and funding critical projects sponsored by local governments, the federal government and semiconductor industry,” said Pragada. “This overlap of spending will continue for four or five consecutive fiscal quarters and drive growth across the infrastructure and energy markets.”

Jacobs’ backlog increased about 1% to about $28.26 billion, up from $28 billion a year ago.

Its people and places solutions (P&PS) and critical mission solutions (CMS) segments added $17.24 billion and $7.63 billion to their respective backlogs. The PA Consulting segment added $306 million to its backlog, while its divergent solutions segment posted $3.08 billion, down from $3.28 billion a year ago, according to the report.

A recent win in the CMS division includes a $92.5 million NASA contract in Ventura County, California. Other projects in the segment include a $300 million, seven-year contract with the National Geospatial-Intelligence Agency and a $170 million five-year contract within the classified budget, according to the company.

Meanwhile, the P&PS segment will continue to benefit from investment in the life sciences, semiconductor and electric vehicle supply chains, said Kevin Berryman, Jacobs CFO. 

“We continue to see robust demand from our life sciences clients, which comprise two-thirds of our P&PS business,” said Berryman. “Our backlog and sales pipeline remains robust across a diverse set of customers and as a result, we continue to expect our advanced facilities growth rate to remain strong during fiscal year 2023.”

Top Takeaways

Arnold, the Edward Jones analyst, said Jacobs’ increased focus on infrastructure, aerospace and cybersecurity projects remains a positive indicator for the company’s outlook.

“Jacobs has exited its energy, chemical and resource business, which tended to be more cyclical and less profitable,” said Arnold in an analyst’s note on the results. “We believe Jacobs’ increased focus on infrastructure, aerospace, cybersecurity and technical building projects bodes well for the future growth and profitability of the company.”

He added the primary downside risk to Jacobs’ performance remains that its business is tied to the overall health of the economy. That means if the global economy deteriorates more than expected, Jacobs’ business would likely be negatively impacted. 

Nevertheless, Arnold said the company’s infrastructure work has long-term potential and that its evolving business mix will drive improved performance.

“We think Jacobs delivered a solid start to fiscal 2023 … [and] remain confident in Jacobs’ long-term growth outlook,” said Arnold in the analyst’s note. “In addition, we view Jacobs as a likely beneficiary of the infrastructure stimulus that was signed into law.”