Jacobs Solutions (NYSE:J) shares dropped nearly 5% in the early session today after the professional services provider announced a mixed set of fourth-quarter results. Revenue jumped by 10.5% year-over-year to $4.29 billion, outpacing estimates by $80 million. EPS of $1.90, however, missed the cut by $0.13. Additionally, the company announced the spin-off and merger of its Critical Mission Solutions (CMS) and Cyber & Intelligence (C&I) units with Amentum.
During the quarter, the company’s backlog increased by 4% year-over-year to $29.1 billion. The quarter was marked by revenue gains across Jacobs’ Critical Mission Solutions, People & Places Solutions, and Divergent Solutions businesses.
Looking ahead to Fiscal year 2024, the company expects adjusted EBITDA to be in the range of $1,530 million and $1,600 million. EPS for the year is anticipated between $7.70 and $8.20.
Further, the separation and combination of Jacobs’ CMS and C&I units with Amentum is expected to result in a $1 billion cash dividend payment for the company. Additionally, Jacobs and its investors will own up to 63% of the combined entity. The transaction is anticipated to close in the second half of 2024.
This strategic move is expected to help Jacobs optimize its portfolio and focus on higher-margin opportunities. Additionally, the company is targeting a margin expansion of at least 300 basis points in Fiscal year 2025.
Is Jacobs a Buy, Sell, or a Hold?
Overall, the Street has a Moderate Buy consensus rating on Jacobs Solutions. Following a nearly 17% rise in the company’s share price over the past six months, the average J price target of $153 implies a modest 11.7% potential upside.
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