Jacobs Wins Contract in Morocco - Analyst Blog

A subsidiary of Jacobs Engineering Group Inc. (JEC), Jacobs Engineering SA (JESA), a joint venture with OCP S.A (OCP), agreed to provide services for OCP's Diammonium Phosphate (DAP) and Monoammonium Phosphate (MAP) production plant, to be built in Jorf Lasfar, Morocco.

According to the agreement Jacobs will be serving the production plants with its engineering, procurement and construction services.

At the beginning of the month Jacobs received contracts from Gatwick Airport Limited (GAL), Federal Aviation Administration (FAA), and CPC Corporation (CPC).

Jacobs' diversification across markets, geographical regions and services will also help to generate growth. Jacobs' plans to expand into the emerging markets of India, China and the Middle East, which are expected to perform much better than the developed markets in the coming years.

Moreover, Jacobs' ongoing acquisition strategy and robust liquidity position will help it to emerge stronger than its competitors like Fluor Corporation (FLR) and Foster Wheeler AG (FWLT). At the end of the third quarter of fiscal 2010, Jacobs' net cash position was $847.6 million.

However, we maintain an Underperform recommendation on the stock based on Jacobs' continuous decrease in backlog since the beginning of fiscal 2010, which is expected to negatively affect its top-line results in fiscal 2011.

The stock is cyclical in nature and thus, the sluggish economic environment, which has reduced the spending power of the clients, was the prime reason for the decrease in backlog. Large investors fear to infuse capital in these unstable market conditions. Moreover, the company faces immense risk as it operates in a highly-competitive environment. The stock retains its Zacks #3 Rank (short-term Hold rating).

 
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