On Tuesday, Citi maintained a positive stance on Jacobs Engineering Group Inc. (NYSE:J), raising its price target to $166 from $138, while keeping a Buy rating on the stock. The adjustment follows the recent completion of the company's spin-off, which is expected to simplify the business narrative for investors.
The firm anticipates that Jacobs Engineering will experience solid earnings growth over the next few years, forecasting mid-teens earnings growth for fiscal years 2025 and 2026, reflecting the effects of the RMT transaction.
The analyst from Citi projects that Jacobs Engineering will benefit from increased visibility in infrastructure markets, particularly in water management and advanced facilities like life sciences and data centers. This visibility is anticipated to support the company's medium to high single-digit top-line growth expectations.
Additionally, the company's strategic focus on reducing costs and emphasizing higher growth and higher margin businesses is expected to gradually enhance its underlying margins, with potential to exceed the projected 13.8% in fiscal year 2025.
Despite the possibility of some "reporting noise" in the fourth-quarter fiscal year 2024 results due to the new CFO's appointment and the major transaction's closure, the underlying results are expected to remain robust.
Jacobs Engineering is likely to reaffirm its preliminary guidance for fiscal year 2025, which includes medium to high single-digit net revenue growth, an adjusted EBITDA margin greater than 13.8%, and free cash flow conversion over 100%. These projections are seen as favorable by investors, especially in light of an upcoming Investor Day scheduled for early next year.
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