Jacobs beats estimates, shares slump on currency headwinds

Dive Brief:

  • Jacobs Solutions reported $644.04 million in profits for its fiscal year 2022 Monday, or $4.98 per share, up from $477.03 million a year ago. Revenue increased to $14.92 billion, up close to 6% from $14.09 billion 12 months earlier, due to strong performances from its infrastructure, national security and advanced facilities work.
  • For the quarter, the company posted net income of $225 million, or $1.75 per share. On a non-GAAP, adjusted basis, earnings per share from continuing operations reached $1.80, up 14% from last year, according to a press release. Revenue for the quarter of $3.88 billion was up 8% from a year ago and slightly above consensus estimates. The results also beat expectations of $1.77 per share, according to an analyst note sent to Construction Dive from financial services firm Baird.
  • Taking foreign currency exchange rates into account, Jacobs issued guidance for adjusted EBITDA growth of $1.4 billion to $1.48 billion, or $7.20 to $7.50 per share, for fiscal 2023. Still, that was 3.3% shy of the $1.49 billion consensus, according to Baird.

Dive Insight:

Jacobs’ backlog rose about 4.6% to $27.86 billion, up from $26.63 billion a year ago. But on a quarterly basis, it was down about 0.8%, according to Baird, and was weighed down by unfavorable currency exchange rates against a strong U.S. dollar.  

Jacobs’ people and places solutions (P&PS) division posted $17.03 billion in backlog, about an 8% rise from a year ago. But its critical missions solutions (CMS) and PA Consulting segments saw backlog fall to $10.56 billion and $269 million, a 0.26% and 11.5% drop from a year ago, respectively.

Interest rates, foreign currency challenges

Higher interest rates and unfavorable foreign currency exchange ratios weighed on Jacobs’ outlook more than expected, said Andrew Wittmann, senior research analyst with Baird, in a research note. He added that “backlog was lackluster in what’s typically a strong bookings quarter,” and the report was “not the kind of quarter that gets investors excited.”

“Jacobs’ earnings release failed to bring much new to the table but foreign exchange, interest expense and margin progression appear all to be slightly weaker than most hoped, pushing shares lower in response,” said Wittmann. “In P&PS (infrastructure) while Jacobs noted its pipeline is seeing the impact of stimulus, its reported financials are not. To be fair, stimulus was always seen as a fiscal 2023 benefit.”

On the positive side, wins in Jacobs’ CMS division included 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. 

In its P&PS segment, the firm won a contract for a new $2 billion biotechnology facility, Intel’s Arizona semiconductor factory and the $1.2 billion Warringah Freeway upgrade in Sydney, Australia.

Looking ahead

Steve Demetriou, CEO at Jacobs, told analysts during a conference call following the results to expect the firm’s advanced facilities and life sciences businesses to show significant growth in the next few years, driven by the need for additional semiconductor manufacturing capacity and post-pandemic life sciences priorities.

Those types of projects are set to benefit from federal spending, such as the Infrastructure Investment and Jobs Act and the CHIPS Act.

“Around advanced facilities, this is a multi-decade type of leadership approach that we’ve had, specifically around semiconductors, but also in life sciences,” said Demetriou during the call. “That’s been a legacy business of ours for forever. We’re seeing those opportunities.”

Jacobs’ shares closed about 3% lower Monday.

Leave a comment