Sterne Agee Comments On Jacobs Engineering 4Q Earnings

Despite coming in just below consensus, Jacob's Engineering Group JEC reported a solid F4Q10 in Sterne Agee's view with better profitability and book-to-bill at 1.06. However, it continues to be concerned with the outlook for a number of JEC's end markets and that likely better Y/Y profitability in FY11, driven by mix, may not be sustainable due to intense competition in the marketplace. Additionally, aside from significant M&A, Sterne believes catalysts for JEC are relatively limited given its long-term relationship business model and focus on small to medium-sized projects. Sterne's $40 price target is based on shares trading at 16.5X its FY11 EPS or a 13% premium to our average E&C target multiple, compared to its historic average of trading in line with the group. Sterne Agee has a Neutral rating on JEC JEC closed Tuesday at $39.95