Jacobs Engineering 2Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

The market is still very price sensitive

“The market continues to be very price sensitive. We are not finding any areas in the market where the conditions are such that we can get significant improvements in price, and we are finding areas where price pressures are still pretty high.”

Buildings business is coming back

“On the building side, our buildings business is getting steadily better. As you know, we repositioned the business to deal with the downturn in the federal contract environment. It looks like federal business will be coming back. We’re seeing it come off a pretty significant weakness with some strength. We’re seeing high-tech is a particularly strong aspect of the business, both mission-critical and data-related activities”

Pharmbio industry has gone from blah to boom

“The product pipeline is picking up. In fact, I would characterize this industry has gone from somewhat blah to somewhat boom.”

Oil and gas still a very strong market globally

“Moving on now to oil and gas, still a very strong market globally, still a lot of investment in North America. CapEx is at historic highs. We see a lot of opportunity in the midstream and pipeline services areas.”

capable of doing $1 B projects

“these $1 billion jobs that I’ve talked about remain things that Jacobs is capable of doing and we continue to win some of those projects and lose some, just as you would expect.”

Don’t have double digit market share at any of the big spenders right now, but winning repeat business

“Our business is built around working for the big spenders in all the industries that we serve. And in no case do we have a share of wallet of any of those big spenders that even approaches double digits. So there’s huge opportunity for us to grow on the back of repeat business, and the high-repeat business is an indication that we’re putting our energies and focus where we should, which is with those clients that have big capital budgets where we can grow share and build relationships.”

Work can fall out of the backlog, but that’s unlikely to happen right now

“Certainly, for example, construction-related backlog is more vulnerable to cancellations than service-related backlog, has a longer tail and it’s the bigger part of the costs that the customer might incur. So those risks are out there. But I don’t see any evidence that those risks are things that are likely to materialize.”

Customers more hesitant on timing than doing the work

“When we talk to customers about their projects and programs, it’s not about not doing the work, it’s more about timing of doing the work in terms of when is it going to happen.”

Customers still perceive the environment as weak, so they’re trying to get favorable terms

“our main customers are perceiving the market as being weak, that’s certainly an expression of the pricing discussion that we had earlier, and they’re trying to take advantage of that by imposing more challenging contract terms.”

It’s really difficult to say when we’ll get backlog growth acceleration

“As I sit here and look at where we are with our customers and what they’re telling us about the drivers for them to make investment decisions, I’m not seeing a significant certainty time-wise about when they’re going to make those decisions. So in terms of real backlog acceleration, I just — I’m very frustrated, but I can’t predict when that’s likely to happen.”

Maybe this isn’t such a boom like construction environment

“I certainly don’t see any evidence that the cycle is over. I do see an abundance of caution from our customers about the cycle and where they are in it and what the likely outcomes are for their projects. And I think that’s actually turning this in from sort of what I think we all believed a couple years ago was going to be boom-like into a much more protracted, less boom-like environment.”

The CEOs I talk to don’t feel the economy is good as the pop press says

‘When I talked to some of the executives at the tops of the organizations we work for, the general belief about the strength of the economy is not as good as what the popular press would have you believe. And I think that’s also affecting that sort of on-the-border decision, should we go ahead and commit or not, let’s wait a little while”

Spending has become more choppy in telecom

“There’s no question in my mind that the spending has become a bit more choppy in the telecom business.”

Engineering has become increasingly fungible globally

“Pricing pressure is probably strongest in the heavy-process industries and in mining and minerals. Mining and minerals driven obviously by the shortage of work, and the heavy-process industry being driven largely because most of the work today is engineering-related, and engineering has become increasingly fungible globally”

The competition is coming from big E&C players

” the more low-cost EPC-lump-sum-oriented organizations. We generally don’t compete with those companies and so I can’t really speak to pricing there…We see the big U.S. and European players, so the CB&Is, the Foster Wheelers, the AmEx, the Atkins, as well KBR, URS, AECOM, Fluor, Bechtel, those folks from the States. And there’s the place where I’m describing what I see as the cost pressure.”