Jacobs Engineering 3Q13 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.

“I would characterize today’s marketplace as compared to 4 or 5 years ago, what you’re referring to, the 1 big project, I think, you’re thinking of, those aren’t necessarily out there. But there’s a large volume of projects that are sort of just a little bit below that, maybe half that size in size. A large number as opposed to before where there were a few of those really big ones, but only a few. So I’ve certainly — personally, where I sit, relative to the chemical business, as Craig said, in the U.S., in the Middle East and even to a degree, in Asia, the prospects are pretty broad and pretty rich and good sized. And I do think that we’ll have an opportunity to capitalize from a construction perspective on a large percentage of them, or at least our share.”

“I don’t think that the 15% growth number is going to be driven by cost-cutting. We’re just not going to save ourselves into the 15% growth.”

“we’re seeing pricing pressure in the public sector markets, part of it anyway, but mostly the federal government arena, that we have not traditionally seen. So that business is more challenging. It isn’t affecting our ability to win work. I think you can see that from the backlog numbers, but the margin that’s in that work is certainly not as strong as it might have been a few years ago. On the opposite hand, things like the private sector businesses, the heavy process market, we are seeing improvements in margins but not significant ones. It’s still more — because a lot of the stuff keep moving to the right, it’s still a more competitive marketplace than I would have told you a year ago I thought it would be at this time.”

“it’s not like the government is creating new kinds of work for us to do. So almost everything in the federal government arena is about market share. And moreover, when you look at the sort of overall contraction of the federal marketplace, coupled with the shift toward more small business awards and fewer large business awards, the pool of opportunity that we’re looking at as a company is clearly smaller year-over-year and probably has been getting smaller now for several years.”

“n the LNG world, as Craig said, there’s a couple of opportunities. There is certainly the infrastructure and overall development of gasfields, collection, distribution fields associated with LNG in general. The installed capital base of the LNG facilities that you can look at in Western Australia and are coming online in eastern Australia, plus other parts of the U.S., represent not immediate but, certainly, in the not-too-distant future, a large opportunity for us to try and capitalize in a continuous presence and support of those capital investments as they come online and go into the future.”

“our infrastructure business is definitely continuing to improve…What is driving is, quite frankly, there’s a lot of states, a lot of municipalities that are starting to re-spend — starting to spend, not re-spend — starting to spend to improve their facilities and do highways and do bridges and do transit systems that they haven’t been able to spend for quite some time in some large metropolitan areas around the south, southwest part of the United States. And so there’s a big — so that’s actually good news in a sense that, that stable, ongoing work at the state level that’s starting to occur pretty — not broadly around the entire United States, but certainly, in some very significant areas, in addition to a few of the large iconic projects. So we’re not looking necessarily to have to win big projects for 2014 to have our success. We’re really looking sort of a baseload business. The larger projects will be a little bit more icing on the cake, I would say.”

“our view of the market is that it’s another area where there are long-term demands for investment that are being under-met at this point in time and that, that investment will drive a good business. And I’m looking at this now in the 5-, 10-, 15-year kind of horizon, not the next quarter or next year kind of horizon. So we think the power business is a business that Jacobs should be in, and I don’t mean by that lump-sum turnkey gas-fired cogen. That’s not what I’m talking about at all. But I think there is a good business out there for a company like Jacobs with our business model, and what we — but we’re really going to have to make an acquisition to make it happen. We’re not going to be able to bootstrap that business. And so that’s why I made a point of mentioning the power business as an area of acquisition so you’d know where our thinking is, but also so people who are in that business listening on this call will know we’re interested.”

“There are some additional, again, sort of second tier — I don’t know, I hate to use that word, but different clients than you might normally think about that are looking at investments as well in the oil sands business in addition to the traditional big energy companies, which, again, adds to my confidence that the overall viability of the oil sands business over the medium and long term is very strong. That’s a business that those clients out there have to develop. It’s an important part of the economy, and they’ll find a way to get the oil out of the country. And one way or the other; it will take longer than maybe some other ways, but they’re all continuing to study and invest at a nice moderate pace, I would say, versus a hectic pace, which, I think, is, quite frankly, healthy in the long run.”

“when you see nontypical investors, it’s usually a good indication of an ongoing, solid capital base. And when the nontypical investors start to run away, things tend to turn down.”

“I would have to say that most of our clients are looking at their investment as long term, and short-term interest rates aren’t a big factor in their decision to invest. That might be true of smaller players. But when you look at big oil, big mining and minerals, big chemicals, big pharma, any of the major customers in this regard, I don’t think they are deceived by short-term interest rates as a key criteria for their investment decisions. So I don’t expect a nominal or reasonable rise in interest rates to have a materially negative impact on new investment.”