The secular growth trends in oil and gas services and infrastructure continue, and a company well-positioned in these two promising sectors, and by extension, worth a review, is Jacobs Engineering Group.
Jacobs Engineering Group (NYSE: JEC) is a diversified engineering/professional technical services company providing services to the chemical, petroleum, pharmaceutical and biotech sectors. The company also has aerospace and defense contracts with the U.S. government.
Analysts expect 14-20% revenue growth for F2008 on strong upstream oil/gas and downstream petroleum refining work. Public transportation infrastructure work also remains solid.
Analysts also like JEC's growth opportunities for chemical projects in the Middle East and Europe. Further, overall margins are expected to improve. The Reuters F2008/F2009 EPS consensus estimates for JEC are: $2.99/$3.59.
The risks? A recession in target-market operations would hurt JEC results, as would a project delay or cancellation. Analysts are also watching the supply of skilled labor for signs of a shortage. Further, JEC's shares are pricey, with a P/E of 42, and also recorded an impressive run in 2007, up more than 100%: a safer play would involve waiting for a pull-back to $80-85. However, keep in mind that JEC's shares may not pull back.
The First Call mean rating for JEC is: Hold. [13 firms.] Mean 2008 target: $94.00. [high: $104, low: $85.]
Stock Analysis: Jacobs Engineering Group is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from JEC's shares. Sell / Stop Loss if you were to purchase shares in this company: $63.
DISCLOSURE: Joseph Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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