Jacobs Engineering Group Inc. J is slated to report second-quarter fiscal 2024 results on May 7, before market open.
In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 34.7% and 3.7%, respectively. On a year-over-year basis, its earnings grew 28% and revenues increased 9.5%.
The leading provider of professional, technical and construction services’ earnings topped the consensus mark in two of the last four quarters and missed on other two occasions, with the average surprise being 7.3%.
Trend in Estimates
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share decreased to $1.84 from $1.90 in the past 60 days. The estimated figure indicates 1.7% growth from $1.81 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $4.25 billion, suggesting 4.2% growth from the year-ago quarter’s reported figure of $4.08 billion.
Jacobs Solutions Inc. Price and EPS Surprise
Jacobs Solutions Inc. price-eps-surprise | Jacobs Solutions Inc. Quote
Factors to Note
Jacobs is expected to witness a boost in revenues during the second quarter of fiscal 2024, thanks to investments from the U.S. Infrastructure Act and other economic incentives. The company’s strategic move away from being solely an engineering and construction firm toward a globally-focused technology solutions provider is likely to reflect in the upcoming financial report. Additionally, this quarter is anticipated to demonstrate the positive effects of a backlog with higher margins, a dedication to efficiency through digital and technological advancements, and solid project execution, all playing roles in driving overall growth.
J’s continuous shift to digitalization and leadership in strategic end markets like space exploration, life sciences, cyber and water solutions bode well. Again, the U.S. Department of Defense’s increased focus on strategic data utilization is likely to have driven Jacobs’ growth.
A favorable revenue mix in both People & Places Solutions (P&PS) and Critical Mission Solutions (CMS) segments and benefits from PA Consulting (which has a solid accretive gross margin profile of nearly 50%) are likely to get reflected in margins. However, higher overhead costs to facilitate the separation of CMS might have dented margins.
Segment-wise, higher spending from the transportation sector and accelerated investments toward drinking water, wastewater, flood protection and climate resilience might have aided the company’s fiscal second-quarter performance in the P&PS segment (which accounted for 58.4% of total revenues in fiscal 2023).
Rapid implementation of digital technologies has been optimizing clients’ operational spending and mitigating revenue challenges. Further, environmental and green economy projects remain strong.
The Zacks Consensus Estimate for P&PS segment revenues is currently pegged at $2.46 billion, reflecting growth of 4.8% year over year in the quarter. P&PS’s operating profit is expected to grow 9.1% to $253 million from a year ago.
The CMS segment (28.7% of total revenues) is expected to have benefited from the consistent performance of the Cyber and Mission-IT business. The company’s CMS strategy has been focused on creating resilient revenue growth and margin expansion by offering technology-enabled solutions aligned to critical national priorities that drive innovative outcomes. Jacobs has been pursuing global energy transition, space-based ISR, intelligence analytics and 5G networks.
The consensus mark for the CMS segment’s revenues is currently pegged at $1.24 billion, indicating growth of 3.9% a year ago. The CMS segment’s operating profit is expected to be $101 million, up from $94 million reported a year ago.
For the Divergent Solutions segment (5.8% of total revenues), the consensus mark for the DVS segment’s revenues is currently pegged at $251 million, indicating a decline from $254 million in the fiscal first quarter. The segment’s operating profit is expected to be $22.8 million, up from $7.6 million reported in the prior quarter.
Meanwhile, on Nov 20, 2023, Jacobs inked a deal to spin off and merge its CMS business and Cyber & Intelligence unit (which is part of the DVS segment) with a global engineering and technology solutions provider, Amentum. For that, Jacobs anticipates temporarily increased overhead costs necessary to facilitate the separation of CMS, encompassing IT and corporate support. As Jacobs continues its journey toward separation and streamlining its corporate cost structure, it has opted to transfer certain corporate unallocated costs to the P&PS segment. This move aims to enhance the long-term recuperation of its corporate overhead. Although this adjustment may temporarily lower segment operating margins, it does not affect the bottom line.
What the Zacks Model Says
Our proven model does not conclusively predict an earnings beat for Jacobs this time around. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Jacobs currently carries a Zacks Rank #3.
Stocks With Favorable Combination
Here are some other companies, which, according to our model, have the right combination of elements to post an earnings beat on their respective quarters to be reported.
Arm Holdings plc ARM has an Earnings ESP of +5.26% and carries a Zacks Rank #2.
ARM’s earnings topped the consensus mark in the last four quarters, with the average being 27.3%.
CareMax, Inc. CMAX has an Earnings ESP of +4.76% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
CAMX’s earnings for the to-be-reported quarter are expected to decline 61.4% year over year.
Envestnet, Inc. ENV has an Earnings ESP of +1.23% and carries a Zacks Rank #3.
ENV’s earnings topped the consensus mark in three of the last four quarters and met on one occasion, with the average being 7.7%. Earnings for the to-be-reported quarter are expected to grow 17.4% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
