Jacobs’ 4Q profits drop amid higher backlog, strategy shift

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Dive Brief:

  • Jacobs announced Tuesday earnings of $150 million for its 2023 fiscal fourth quarter, which ended Sept. 30, marking a 33.3% drop from its earnings of $225 million a year ago, according to the company’s earnings report.
  • Revenue for its fourth quarter jumped to $4.3 billion compared to $3.9 billion in the prior year, up more than 10.3% due to strong activity in the advanced manufacturing, infrastructure and water sectors, said Jacobs CEO Bob Pragada.
  • The Dallas-based company reported its backlog reached $29.1 billion, about a 4.3% jump from last year. That increase stems from growth in all of Jacobs’ business segments, according to the earnings report.

Dive Insight:

Jacobs entered into a definitive agreement to spin-off and combine its Critical Missions Solutions business with Amentum, a global engineering and technology solutions provider. The company first announced the intent to separate its CMS business in May.

The transaction marks an important milestone in Jacobs’ transition to focus exclusively on critical infrastructure and sustainability projects in the water and environment, energy transition, transportation and advanced manufacturing sectors. Excluding the businesses being separated, Jacobs generated about $10.9 billion in revenue for its entire fiscal year 2023, a 3.8% increase from the $10.5 billion in revenue for its fiscal year 2022.

The CMS business provides consulting services to government agencies in the national security, space, nuclear remediation and 5G technology sectors, and it represented about 35% of company revenues last year, according to Jacobs.

“By separating CMS and associated Cyber & Intelligence Solutions, Jacobs will streamline our business portfolio and transform into a more focused, higher-margin company more closely aligned with key global mega trends,” said Pragada. “We believe this transaction is in the best interests of the company and our stakeholders.”

That spin-off means Jacobs can focus on trending sectors, such as water projects and advanced facilities, said Pragada. Of the top 30 wins for Jacobs in the fourth quarter, half were in the water and advanced facilities sectors, he added.

That includes Jacobs’ recent $25 million award to operate and maintain a water treatment plant for the city of Waterbury, Connecticut. Jacobs’ scope of work includes engineering services and support for improvements to the overall facility, sludge system, water quality lab and treatment process. 

Pragada expects this positive momentum around advanced facility projects to persist, such as in semiconductor fabs or life sciences construction. He added underlying growth metrics remain strong and that opportunities in these sectors “will stay high.”

Takeaways from earnings

Jacobs’ exit from its CMS business and heightened focus on infrastructure and advanced manufacturing bodes well for the future growth and profitability of the company, said Matt Arnold, industrial analyst with financial services firm Edward Jones, in a research note.

“We think the separation of the business and merger with Amentum makes sense and focuses Jacobs on its strongest assets,” said Arnold. “The remaining company will have strong positions in infrastructure consulting and advanced facility design. The intent of the spinoff is to focus Jacobs on its faster-growing and more profitable infrastructure business.”

For example, Jacobs recently won awards to operate and maintain wastewater and surface water treatment plants for the city of Farmington, New Mexico, as well as the management of wastewater and stormwater network infrastructure in Boston, to name a few. 

Jacobs identified earlier this summer water infrastructure work as a growing sector, according to Luce Bassetti, its Americas coastal resilience director.

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