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Understanding Jacobs Engineering’s Newly Added Risk Factors

Texas-based Jacobs Engineering (J) is a full spectrum professional services provider serving corporate and government clients around the world. It recently acquired BlackLynx to bolster its digital solutions business. It has also recently made a minority investment in Microgrid Labs and concurrently entered into a strategic partnership to expand its solutions to the vehicle electrification industry.

Further, Intel (INTC) has tapped Jacobs to help it solve the global chip shortage problem by providing fab engineering solutions for its manufacturing capacity expansion project.

With this in mind, we used TipRanks to take a look at the latest financial performance and understand the newly added risk factors for Jacobs. (See Analysts’ Top Stocks on TipRanks)

Q4 Financial Results

Jacobs reported revenue of $3.6 billion for its Fiscal 2021 fourth-quarter ended October 1, falling short of the consensus estimate of $3.7 billion. Revenue was $3.5 billion in the same quarter last year. The company posted adjusted EPS of $1.58, beating the consensus estimate of $1.56. (See Jacobs Engineering stock charts on TipRanks).

Risk Factors

According to the new TipRanks Risk Factors tool, Jacobs’ main risk category is Finance and Corporate, accounting for 33% of the total 51 risks identified for the stock. The company recently updated its profile with six new risk factors.

After purchasing a minority stake in Microgrid Labs and entering into a strategic partnership, Jacobs reminds investors that it may make minority investments in other companies and ink commercial partnerships from time to time. But it cautions investors that such arrangements may not deliver the expected results. It mentions that a minority stake may reduce its ability to influence the decisions of the company in which the investment is made. Therefore, Jacobs could incur losses if the company’s management and majority stakeholders make decisions that do not serve Jacobs’ interest. Moreover, Jacobs warns that it could suffer reputational damage if the company in which it has invested and commercial agreements make business or management decisions with which it does not agree.

Jacobs tells investors that it earns a significant portion of its revenue from contracts with U.S. government agencies. It warns that any harm to its reputation or relationship with the government could result in the loss of government contracts, which would have a material adverse impact on its business and financial condition.

Jacobs informs investors that it has committed to achieving certain climate change targets, including becoming carbon negative across its operations. However, the company cautions that it may fail to achieve those ambitious targets because of factors beyond its control. The problem is that failure to achieve the climate targets may cause Jacobs to lose investors and customers. As a result, its business and stock price could be adversely affected.

The Finance and Corporate risk factor’s sector average is 36% compared to Jacobs’ 33%. Jacobs’ stock has gained about 31% year-to-date.

Analysts’ Take

Following Jacobs’ Q4 earnings report, Credit Suisse analyst Jamie Cook maintained a Buy rating on Jacobs stock and raised the price target to $162 from $156. Cook’s new price target suggests 13.64% upside potential

Consensus among analysts is a Strong Buy based on 3 Buys and 1 Hold. The average Jacobs Engineering price target of $165.75 implies 16.27% upside potential to current levels.

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