Jacobs Solutions Co., Ltd. J has made a strategic decision to separate its Critical Mission Solutions (“CMS”) and Cyber & Intelligence Government Services businesses and merge them with Amentum, a global engineering and technology solutions provider.
The move follows an earlier announcement that Jacobs would separate its CMS business and is part of a comprehensive review aimed at positioning both companies for further success. The result is a newly public company in government services with an impressive $13 billion in annual revenue.
Jacobs stock rose 1.2% during trading hours on Nov. 20 and rose 3.7% during after-hours trading.
Merger synergy
The combination includes Jacobs' CMS, the Cyber & Intelligence division of its Divergent Solutions business, and Amentum, creating a powerful government technology solutions business. Jacobs will maintain an innovative data solutions and digital technology business in line with its core focus of delivering digitally enabled critical infrastructure solutions.
This strategic separation has streamlined Jacobs' business portfolio, transforming it into a more focused and profitable company closely aligned with key global megatrends. The company aims to build leadership positions in water and environment, energy transition, transportation and advanced manufacturing to address complex critical infrastructure and sustainability challenges.
The transaction is expected to close in the second half of fiscal 2024 and provides significant financial strength. With a total backlog of approximately $50 billion, total revenues of $13 billion, and a projected total adjusted EBITDA of $1.1 billion in 2024, the new entity is poised for significant growth. The move also promises a favorable future for shareholders, with Jacobs and its shareholders owning between 58.5% and 63% of the combined company's common stock upon completion.
Amentum's current CEO, John Heller, will lead the combined company, and Jacobs' executive chairman, Steve Demetriou, will serve as executive chairman. The partnership is expected to provide extensive expertise in key government areas such as energy, space exploration, intelligence and analytics, and digital modernization.
Jacobs will receive $1 billion in cash upon closing, subject to customary adjustments, solidifying its strategic and financial position in the evolving government services environment.
price performance
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Over the past year, Jacobs stock has increased 10.9%, while its industry has increased 28.6%. The company is underperforming its industry, but infrastructure modernization, sustainable energy transition, national security imperatives, and the potential for a global supply chain investment supercycle will improve future performance. It is expected that this will happen.
Zacks Rank and Stocks to Consider
Jacobs currently carries a Zacks Rank #4 (Sell).
Some of the top stocks in the Zacks Business Services sector include: Trinet Group Co., Ltd. T-net, DocuSign Inc. DOCU and SPX Technologies Co., Ltd.. SPXC.
TriNet currently sports a Zacks Rank #1 (Strong Buy). TNET achieved an impressive four-quarter average return of 77.4% of his. The company's stock price has increased 58.8% over the past year.You can view See the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TNET's 2023 revenue is pointing to a decline of 2.7%, while its earnings per share (EPS) are implying an increase of 4% compared to the prior year's reported numbers.
DocuSign currently has a Zacks Rank of 2 (Buy). DOCU's average earnings for the fourth quarter were a surprise of 27.1%. The stock price has fallen 0.2% over the past year.
DOCU's 2024 Zacks Consensus Estimates for revenue and EPS represent growth of 8.6% and 29.1%, respectively, from the year-ago reported numbers.
SPX Technologies currently has a Zacks Rank of 2. SPXC's fourth-quarter earnings surprise by an average of 28%. The company's stock price has increased 23.8% over the past year.
The Zacks Consensus Estimates for SPXC's fiscal 2023 revenue and EPS represent growth of 20% and 38.7%, respectively, from the prior year's reported levels.
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