Dallas-based Jacobs Engineering hopes to win at least one of two Energy Department awards for potential 10-year, multibillion-dollar contracts at the Hanford Site in Washington state, including one where it is the incumbent vendor.
Jacobs Chairman and CEO Steve Demetriou said Monday he anticipates DOE will award the Central Plateau Cleanup Contract at Hanford soon, although he did not offer a more specific timeline. Demetriou indicated Jacobs has rebid on the contract, currently held by subsidiary CH2M Plateau Remediation.
By contrast, DOE should issue the Tank Closure Contract “closer to the end of the year,” Demetriou said during Jacobs’ quarterly earnings call with financial analysts.
Both the Central Plateau business, valued at between $7 billion and $12 billion, and the tank contract, worth between $10 billion and $15 billion, could be out by the end of this month, the Energy Department said in its last procurement timetable. The agency issued requests for proposals for the two contracts in February.
The current Central Plateau cleanup contract, held by CH2M, is valued at $5.8 billion. The company is on the job at least through the end of September thanks to the 12-month extension issued last fall to its initial 10-year contract. The work includes waste retrieval and fuel management as well as continued demolition of the Plutonium Finishing Plant.
AECOM-led Washington River Protection Solutions has the current tank operations business, valued at about $7 billion thanks to a similar year-long extension through the end of September. The contract involves managing 177 underground tanks containing about 56 million gallons of radioactive waste.
There has been talk within the nuclear cleanup industry lately that Jacobs could be kicking the tires on a possible purchase of part or all of another Texas-based company, Fluor, which has fallen upon hard times lately. Fluor’s stock price has gone from almost $33 at the start of the year to just over $20 this week. It changed CEOs in May.
While Fluor was not mentioned, Demetriou was asked about the prospects of any mergers and acquisitions soon. “Any sort of M&A deal has to be superior to buying back our stock,” he said.
Ideally, any potential acquisition would add geographic diversity to Jacobs, which derives the bulk of its business from the United States, the CEO said.
Jacobs Quarterly Revenue Increases
Jacobs recorded $3.2 billion in revenue for the quarter ended June 28, up $300 million from $2.9 billion during the same period a year ago.
Earnings from operations dropped from $113 million, or $0.79 per diluted share a year earlier, to $89 million, $0.65 per diluted share, for the fiscal third quarter, Jacobs said in a report issued before the market opened Monday. The company, a major contractor in the Department of Energy nuclear complex, attributed the lower earnings to higher restructuring and transaction costs.
Revenue for the Aerospace, Technology and Nuclear division, which includes NASA and Energy Department contracts, grew from $1.02 billion a year ago to $1.16 billion in the latest quarter. Operating profit for the business line rose from $69 million in the third quarter of fiscal 2018 to $76 million in the latest reporting period.
About 89% of the ATN business is domestic, and 85% of its business is from government contracts, according to the quarterly slide presentation.
Company-wide, Jacobs increased its fiscal 2019 earnings outlook to the $4.75 to $5. That is up from the last quarterly guidance of $4.45 to $4.85.
The integration of former rival CH2M, which Jacobs purchased for $3.27 billion in December 2017, is going better than expected in terms of revenue and cost targets, according to Jacobs Chief Financial Officer Kevin Berryman. Integration should be completed by the end of the calendar year, he said.
“As we execute against our strategy, we are profitably winning a greater level of business in our existing sectors, while diversifying into the new high margin growth opportunities,” Demetriou said in the earnings press release.
Jacobs expects to achieve $175 million in CH2M cost savings by the end of 2019 calendar year.
In April of this year, Jacobs completed the sale of its Energy, Chemicals, and Resources division to WorleyParsons for about $3.3 billion.
