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How Does Jacobs Engineering Look for Fiscal 2017?

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Guidance for fiscal 2017

In the 4Q16 earnings call, Jacobs Engineering (JEC) provided its initial guidance for the adjusted EPS (earnings per share) as well as a brief overview on the prevailing market conditions. The company stated that its oil and gas and mining and industrial clients are facing weak customer demand. As a result, clients are conservative with their capital expenditures. Growth expectations are restricted to certain select markets such as healthcare (IHF), aerospace (XAR), and infrastructure. The adjusted EPS for fiscal 2017 is expected to be $3.00–$3.30. The company also stated that it intends to make a large strategic investment of $0.15 per share. The company will explain it more during Investor Day on December 1. The investment entails bringing in external consultants, making certain system enhancements, and bringing in new toolsets and project controls. A large portion of the $0.15 investment is expected to be incurred in 1Q17.

The company mentioned that it put in working capital and days of sales outstanding in its management incentive compensation last year. Therefore, the cash flow position and working capital efficiency are expected to be stronger going forward.

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Share buyback program 

Share repurchases are a key part of the returns for Jacobs Engineering’s shareholders. It authorized a three-year plan to repurchase shares worth $500 million in August 2014. In fiscal 2016, the company repurchased 3.4 million shares worth $154 million and reduced the share count by 3.7% compared to fiscal 2015. In the fourth quarter, the company repurchased 1 million shares worth $50 million. Jacobs Engineering stated that it will provide updates related to the capital allocation on buybacks during its Investor Day on December 1, 2016.

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