30 de marzo de 2009 / 17:26 / en 8 años

BUY OR SELL-Is Jacobs Engineering a near-term buy?

BANGALORE, March 30 (Reuters) - Jacobs Engineering Group's (JEC.N) shares have seen some sharp swings in the past one year -- they dropped to a three-year low in November, but have doubled since then.

Analysts have a largely positive recommendation on the stock but does it warrant an immediate buy even at the risk of more project cancellations? Or can one wait for it to get cheaper?

Pasadena, California-based Jacobs, which serves the oil and gas, energy, refining, and infrastructure markets, has been having some recent troubles with backlog cancellations and delays.

It removed about $840 million from backlog in its latest first quarter due to project cancellations and some projects have been delayed as well. Jacobs is at the receiving end of capex cut at oil sands clients, including Suncor Energy (SU.TO).

Analysts say Jacobs will be hit by the reported slowdown of Motiva's Port Arthur refinery expansion. [ID:nN23314144]

It might not benefit much from the stimulus plan as only a small part of its business (about 12 percent) is exposed to related contracts.

But about eight analysts tracking the stock still recommend a "buy" or an equivalent rating, while only 3 analysts hold a "sell." Five maintain a "hold" rating.

Price targets vary between $28 and $61, while the stock currently trades just below $40.

Jacobs' shares have lost about 48 percent of their value in past 12 months, but have regained 51 percent since they touched a 52-week low of $26.02 last November.

In the past 12 months, the stock has underperformed the S&P 500 .SPX but outperformed the engineering and construction composite index.

So is it the right time to be buying the stock? Or should one wait till the energy markets recover? Here are some analysts' view:

A CAUTIOUS BUY?

"This time I would be buying the stock," said Mike Dudas, analyst with Jefferies & Co.

"Given the overall economic concern and uncertainty, Jacobs' diversified end markets and solid business model should allow the company to generate viable good earnings growth throughout this pause," said Dudas, who has a $60 price target.

Morgan Joseph's Richard Paget strongly recommends a long-term buy, but said investors can wait a little bit more. He sees the stock getting into the mid-30s.

"If you are a long-term investor you can buy now, but in the short term, I can see more pressure," Paget said. He, however, still maintains a "buy" rating.

He said the stock would come under pressure because of speculation that large projects in oil and gas sector are getting delayed.

Sterne Agee & Leach's Chase Jacobson said he views Jacobs as a high-quality, low risk engineering and construction firm. But he has "neutral" rating on concerns of more project cancellations.

ANAEMIC END MARKETS A SELL

Analysts who recommend a "sell" rating are concerned about the company's end markets, particularly declining capex in its oil sands refining market.

Macquarie Research Equities analyst Sameer Rathod, who initiated coverage of the stock last week with an "underperform" rating, said Jacobs could see more oil sand project cancellations.

He said Jacobs' exposure to Canadian oil and sands markets, and delay in Motiva project were two main reasons why he recommends a sell.

He expects Jacobs' backlog to contract 20 percent in the next four quarters.

"Primary reason I have a sell rating on the stock is because of their exposure to the oil, gas and refining cycle," said BMO Capital Markets analyst Avram Fisher.

He believes capex spending in the oil sands market was nearing its trough.

Fisher also said the company's current stock price - at about 12 times 2009 and 2010 numbers - was arguably high.

"I think an eight to 10 multiple is more appropriate for a company whose primary end markets is likely to be dormant if not getting worse," said Fisher.

"I would not look at the stock until it is in the low 30s at least." (Reporting by A.Ananthalakshmi in Bangalore; Editing by Anil D'Silva)

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