Jacobs Engineering 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

National government spending

“Starting with the national government’s business. It is clearly improving. Now that we have a budget that provides some funding certainty, that positions us very well. And the good news is that the money is going where we provide a lot of services.”

Hot areas of infrastructure spending:

“A lot of water projects out there, a lot of activity in Asia Pacific, and we see something on the order of $70 billion worth of infrastructure-related projects in the Middle East…tremendous opportunity in telecommunications and gas distribution business…in the Buildings business, there are just a lot of good activity particularly in the technically complex buildings that we favor. So things like scientific facilities, laboratories, healthcare, all very strong. And then of course the high-tech market, data centers, control and operation centers and the like remains very strong.”

Minerals and mining sector picking back up

“Mining and minerals is growing. It’s growing for us and the good news is, we think the industry is seeing the market come back a little bit. Commodity prices are firming. People’s expectations about where commodities would go, particularly iron ore and gold, haven’t come through. The copper supply situation remains a concern, and so we’re starting to see people contemplating real projects again.”

M&A is a long sales cycle

“there are a number of nice sized, privately held firms who have good positions in the power industry and whose positions are very consistent with our relationship-based business model. And to your point, they are — the ownership, the leadership is aging and that does usually create — seeming [ph] opportunities for us. But remember that these acquisitions are always opportunistic, we have to have a willing seller, as well as a willing buyer. So we continue to stop by and visit those folks and make sure they know we’re interested and that we would love to have them be a part of the future. And sooner or later, one of them will say yes but it’s just impossible to predict when that might happen.”

Consolidation needed in E&C industry

” have believed for some time and I continue to believe that our industry needs to consolidate and it will continue to do so and I think we will see both small consolidations, a lot of the things Jacobs traditionally has done, midsized consolidations like the SKM deal for us and then I think there’s still a potential for some fairly significant — not sure of public companies but public company scale businesses to be acquired as well. “