July 28, 2009 / 7:43 PM / in 9 years

UPDATE 2-Jacobs shares fall on weak backlog, lowered '09 view

(Adds analysts’ comments, updates share movement)

By A.Ananthalakshmi

BANGALORE, July 28 (Reuters) - Shares of Jacobs Engineering Group Inc (JEC.N) fell 9 percent Tuesday, a day after the construction services company reported lower quarterly profit and backlog, and trimmed the top end of its 2009 earnings forecast range.

Jacobs reported third-quarter backlog of $15.8 billion, down 5 percent sequentially, and removed about $665 million from backlog due to project cancellations and shifting cost risks to customers.

Barclays Capital analyst Andy Kaplowitz said backlog might have troughed in the third quarter, and it could stabilize in the next couple of quarters and rise again toward the end of calendar year 2009 and early 2010.

A company executive said on a conference call that about $300 million of backlog in the third quarter was hit by a project cancellation in the upstream market and there might be more cancellations going forward in that segment.

“I am not going to rule out a cancellation (in the fourth quarter) but I expect the overall oil and gas markets to be slightly firmer, meaning slightly lower chance of cancellations,” said analyst Kaplowitz, who has an “equal weight” rating on the stock.

The Pasadena, California-based company, which caters to industrial, commercial, and government clients, said although the oil sands business appears to have “reenergized,” it would like its exposure to that market to be smaller.

About 55 percent of the company’s revenue comes from the oil market.

“While our public sector markets - led by national government programs - remain good, our growth there was insufficient to offset declines in our private sector markets,” CEO Craig Martin said.

Jefferies & Co analyst Michael Dudas said though Jacobs’ public sector would get a boost in 2010 through stimulus spending, it would be the energy and oil markets that would drive a recovery in earnings and orders.

Dudas said the company’s new outlook reflects backlog issues, and he sees an upside to its backlog in 2010.

Jacobs, which ended the quarter with $1 billion in cash, said it would capitalize on acquisitions over the next few quarters.

Jacobs also said it was expanding aggressively in India and the Middle East and that it was looking to bring its domestic and international exposure to about 50 percent each, from a current ratio of 60 percent to 40 percent.

On Monday, Jacobs posted a profit of 76 cents a share, in line with Wall Street estimates, but saw revenue fall 7 percent during the quarter. [ID:nBNG469077]

For 2009, the company trimmed the top end of its earnings range by 15 cents to $3.35 a share. It had previously forecast an earnings range of $3.10 to $3.50 a share.

Barclays’ Kaplowitz said investor sentiment was negative as the company has lowered its outlook for the second time and on concerns about its exposure to U.S. refining market.

Shares of company fell $3.13 to $40.26 Tuesday afternoon on the New York Stock Exchange. They touched a low of $39.63 earlier. (Editing by Anil D’Silva and Deepak Kannan)

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