Jacobs Engineering Group: Navigating Headwinds with Resilient Q2 Growth

Jacobs Engineering Group Inc. (NYSE: JEC) delivered a robust fiscal second quarter 2025 performance, showcasing its ability to navigate macroeconomic and geopolitical challenges while maintaining momentum in high-growth sectors. The quarter highlighted strong backlog growth, margin expansion, and disciplined capital allocation, underscoring management’s focus on long-term value creation.

Key Financial Highlights

The company reported $2.9 billion in gross revenue, a 2.2% year-over-year increase, with adjusted net revenue rising 3.1% to $2.14 billion. While GAAP net earnings fell to $11.2 million due to a $109.5 million non-operational loss tied to its former Amentum stake, adjusted EBITDA rose to $287 million, reflecting a 3.5% margin expansion to 13.4%. This margin improvement is critical, as Jacobs aims to reach a 16%+ EBITDA margin by fiscal 2029.

The adjusted EPS of $1.43 marked a 23% year-over-year increase, demonstrating operational resilience despite headwinds. GAAP EPS, however, dropped to $0.10 due to the aforementioned one-time charges.

Backlog Growth Signals Sustained Demand

Total backlog surged to $22.2 billion, a 20% year-over-year increase, driven by strong bookings across segments. The Q2 book-to-bill ratio of 1.1x and a trailing twelve-month (TTM) ratio of 1.3x indicate healthy demand, particularly in critical infrastructure, life sciences, and energy transition projects. This robust backlog positions Jacobs to deliver mid-to-high single-digit revenue growth for fiscal 2025, as outlined in its reaffirmed guidance.

Segment Performance: Strength in Specialization

• Infrastructure & Advanced Facilities (I&AF): This core segment, representing ~89% of 2024 revenue, grew despite a JV-related reserve impacting operating profit. Key drivers included wins in water infrastructure, transportation, and advanced manufacturing, aligning with Jacobs’ focus on high-margin sectors.
• PA Consulting: The smaller but high-margin segment reported 5% revenue growth, leading to a 12% rise in operating profit. This reflects demand for digital transformation, energy transition, and government advisory services, underscoring its role as a growth catalyst.

Balance Sheet Strengthening Amid Debt Reduction

Jacobs prioritized capital returns and debt management:
- Share Repurchases: The company repurchased $351 million in Q2 alone, bringing H1 repurchases to $552 million, reflecting confidence in its financial flexibility.
- Debt Reduction: Post-refinancing, long-term debt dropped to $2.6 billion, down from $3.14 billion in fiscal 2024. A $700 million refinancing at lower rates and an equity-for-debt exchange using its former Amentum stake further improved liquidity.

Risks and Challenges

Despite these positives, Jacobs faces risks including:
- Geopolitical Tensions: Conflicts in the Middle East and Eastern Europe could delay project approvals or funding.
- Inflationary Pressures: Rising labor and material costs may compress margins unless offset by operational efficiencies.
- Execution Risks: The $109.5 million JV reserve highlights potential legal and operational pitfalls in complex projects.

Outlook and Valuation

The company reaffirmed its fiscal 2025 guidance:
- Adjusted EBITDA Margin: 13.8%–14.0% (up from 13.4% in Q2).
- Free Cash Flow (FCF): Expected to exceed 100% of net income, supported by working capital management.
- Adjusted EPS: $5.85–$6.20, implying low double-digit growth from 2024.

Conclusion

Jacobs Engineering Group’s Q2 results affirm its strategic focus on high-margin sectors and disciplined capital allocation. With a 20%-growing backlog, margin expansion, and a $1.5 billion share repurchase authorization, the company is well-positioned to capitalize on tailwinds in infrastructure, energy transition, and advanced manufacturing.

While risks like geopolitical instability and inflation remain, Jacobs’ track record of execution—evident in its $22.2 billion backlog and 13.4% EBITDA margin—suggests resilience. Investors should monitor execution on its 16%+ EBITDA margin target and FCF conversion, which, if achieved, could drive meaningful upside. For now, Jacobs’ Q2 performance reinforces its status as a defensive yet growth-oriented play in the engineering and infrastructure space.

Data as of March 28, 2025. Figures subject to final Q2 2025 earnings release on May 6, 2025.