Jacobs Engineering (J) Up 4.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Jacobs Engineering (J). Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Jacobs Engineering due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Jacobs Earnings Match Estimates in Q1, Margins High

Jacobs Engineering Group Inc (NYSE:J). reported first-quarter fiscal 2020 (ended Dec 27, 2019) results, wherein earnings met the Zacks Consensus Estimate, while revenues beat the same. Meanwhile, the company has reaffirmed its adjusted EBITDA guidance for fiscal 2020.

It reported adjusted earnings of $1.20 per share, which met the consensus estimate but increased 20% from the year-ago period. The upsurge was driven by accelerated CH2M cost savings and prudent strategy execution. Notably, the company is in the final stages of successful M&A restructuring and separation initiatives, which will position it well to deliver improved free cash flow generation throughout fiscal 2020 and beyond.

During the reported quarter, Jacobs’ revenues came in at $3.36 billion, surpassing the consensus mark of $3.317 billion by 1.3% and increasing 9% year over year. The improvement was driven by healthy segmental businesses and acquisitions. Backlog as of Dec 27, 2019 totaled $22.7 billion, up 11% from a year ago.

Segment Details

Revenues from the Critical Mission Solutions segment (representing 44.5% of total net revenues) of $1.18 billion increased 14.2% year over year. Backlog at the end of the quarter was roughly $8.5 billion, up 18.4% year over year.

Revenues from the People & Places Solutions segment (55.5%) totaled $1.47 million, which increased 7.4% year over year. Backlog at the end of the quarter was roughly $14.2 billion, up 7.7% year over year.

Margins Profile

In the quarter under review, adjusted gross profit increased 12.8% year over year to $6.4 million. Adjusted selling, general and administrative expenses increased 5.7% from the prior-year quarter to $408 million, representing 15.3% of total revenues. Adjusted operating margin improved 120 basis points to 8.9% in the quarter.

Balance Sheet & Cash Flow

At the end of the fiscal first quarter, Jacobs had cash and cash equivalents of $619.2 million, down from $631.1 million at fiscal 2019-end. Long-term debt balance increased to $1.4 billion at the end of the quarter from $1.2 billion at fiscal 2019-end.

In the fiscal first quarter, the company’s cash used in operating activities was $137.2 million compared with $224.7 million a year ago.

2020 Guidance

The company expects adjusted EBITDA between $1,050 million and $1,150 million. It expects double-digit growth in adjusted EBITDA and EPS.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Jacobs Engineering has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Jacobs Engineering has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.