The Zacks Analyst Blog Highlights: Jacobs Engineering Group, Fluor, Foster Wheeler AG, Lowe's Companies and The Home Depot

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Nov 15, 2011, 09:30 ET

CHICAGO, Nov. 15, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Jacobs Engineering Group Inc. (NYSE: JEC), Fluor Corporation (NYSE: FLR), Foster Wheeler AG (Nasdaq: FWLT), Lowe's Companies Inc. (NYSE: LOW) and The Home Depot Inc. (NYSE: HD).

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Here are highlights from Monday's Analyst Blog:

Earnings Preview: Jacobs Engineering

Jacobs Engineering Group Inc. (NYSE: JEC) will be reporting its fourth-quarter and fiscal 2011 earnings on Tuesday, November 15, 2011.

The current Zacks Consensus Estimate for earnings per share (EPS) is 73 cents, representing an annualized growth of 18.90%.

With respect to earnings surprises over the trailing four quarters, JEC outperformed the Zacks Consensus Estimate in one quarter; was in line in another and lagged behind in two other quarters. Average earnings surprise was a negative 1.75%. The average earnings surprise implies that the company underperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third Quarter Highlights

On July 25, 2011, Jacobs Engineering Group Inc. reported its financial results for the third quarter of 2011 with net earnings per diluted share of $0.71 in the quarter, up from $0.15 reported in the year-ago quarter. Results were marginally above the Zacks Consensus Estimate of $0.70.

Total revenue jumped 9.4% year over year to $2,744.2 million, above the Zacks Consensus Estimate of $2,687.0 million. Revenues from Technical Professional Services (58.1% of total revenue) increased to $1,593.5 million from $1,280.1 million in the third quarter of fiscal 2010 while revenues from Field Services (41.9% of total revenue) dropped 6.3% to $1,150.7 million.

Agreement of Estimate Revisions

In the last 30 days, none of the analysts providing estimate increased or decreased the company's earnings per share (EPS) for the fourth quarter, as there was no catalyst for such change. However, for fiscal 2011, one analyst increased the estimate in the last 30 days while one decreased the same for fiscal 2012.

Magnitude of Estimate Revisions

Estimates over the last 30 days remained intact at 73 cents per share for the fourth quarter of 2011, representing a year-over-year growth of 18.90%.

Estimate for fiscal 2011 also remained intact at $2.59 over the last 30 days while that for fiscal 2012 demonstrated a similar trend at $3.01. These estimates represented a year-over-year growth of 4.48% for 2011 and 16.03% for 2012.

Our Take

Jacobs is likely to post impressive results in the fourth quarter and fiscal 2011 based on improvements in the economic conditions and end markets as well as the company's diversification across geographies and services. We believe that the company's contract wins as well as controlled SG&A expenses and backlogs over time will help to improve financials, going forward.

Jacobs Engineering Group Inc. is one of the world's largest engineering and construction companies providing services to a variety of industrial, commercial and government clients across a global network. The company directly competes with its peers, Fluor Corporation (NYSE: FLR) and Foster Wheeler AG (Nasdaq: FWLT).

We currently maintain a long-term Neutral recommendation on the stock. Jacobs has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).

Lowe's Beats Estimates

Lowe's Companies Inc. (NYSE: LOW), the world's second largest home improvement retailer, recently posted better-than-expected third-quarter 2011 results, thereby raising its fiscal 2011 sales outlook.

Let's Unveil the Picture

The quarterly earnings of 35 cents a share beat the Zacks Consensus Estimate by a couple of cents and jumped 12.9% from 31 cents delivered in the prior-year quarter. However, on a reported basis, including one-time items, the quarterly earnings came in at 18 cents a share, down 37.9% from 29 cents earned in the year-ago quarter.

Net sales for the quarter crept up 2.3% to $11,852 million from $11,587 million delivered in the year-ago quarter. Net sales also comfortably surpassed the Zacks Consensus Estimate of $11,690 million. The company had earlier forecasted sales to increase approximately 2% during the quarter.

Comparable-store sales during the quarter inched up 0.7%. Management had earlier predicted comparable-store sales to remain flat in the quarter.

Lowe's indicated that gross profit edged down 0.6% to $4,037 million, whereas gross margin contracted 100 basis points to 34.1% during the quarter.

Stores Update

During the quarter, Lowe's opened 8 stores. The company expects to open 25 new stores during fiscal 2011. At the end of the quarter, the company operated 1,744 stores in the United States, Canada and Mexico.

Other Financial Aspects

Lowe's ended the quarter with cash and cash equivalents of $675 million, total long-term debt of $6,615 million, reflecting debt-to-capitalization ratio of 28.2%, and shareholders' equity of $16,809 million. The company generated about $3,892 million in cash flow from operations during the first-nine months of fiscal 2011.

Strolling Through Guidance

Lowe's said that it now expects fourth-quarter 2011 earnings in the range of 20 cents to 23 cents a share. For fiscal 2011, management expects earnings between $1.57 and $1.60 per share, excluding charges of 20 cents related to store closings and discontinued operations.

The current Zacks Consensus Estimates are 23 cents for the fourth quarter and $1.59 per share for fiscal 2011.

Management now expects sales to increase approximately 8% in the fourth quarter and between 2% and 3% in fiscal 2011. Earlier, Lowe's had forecasted fiscal 2011 sales to increase by approximately 2%.

Lowe's, which faces stiff competition from The Home Depot Inc. (NYSE: HD), expects comparable-store sales to remain flat or up 1% in the fourth quarter but to decline by 1% in fiscal 2011.

Let's Conclude

With the global economic environment still struggling, we believe that spending on big remodeling projects will likely remain under pressure until the housing market stabilizes, inventory levels normalize and consumer-spending rebounds.

Lowe's recently undertook initiatives such as reformation of its store and merchandising operations to enliven competence, augment operational efficiencies and enrich the shopping experience for customers. All these benefited the company to some or the other extent.

The company also replaced its old tag line "Let's Build Something Together" with a new one "Never Stop Improving", thereby reflecting the company's new brand strategy. We believe that the new tag line would help the company to build a sense a confidence among its consumers.

The new tag line mirrors the company's endeavor of improving and developing innovative ideas to cater to the constant changing demands and preferences of consumers. Lowe's also initiated an online tool, "MyLowes", to aid consumers better manage their homes and other home remodeling projects.

We believe that "Never Stop Improving" campaign and "MyLowes" may help Lowe's in gaining a competitive advantage.

Currently, we have a long-term 'Neutral' rating on the stock. Moreover, Lowe's holds a Zacks #3 Rank that translates into a short-term 'Hold' rating, and correlates with our long-term view.

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