Jacobs Engineering (J) carries our highest investment recommendation of 5-STARS, or Strong Buy, notes analyst Elizabeth Vermillion in CFRA Research's flagship newsletter, The Outlook.

Jacobs provides a broad range of technical, professional, and construction services to numerous industrial, commercial, and government clients worldwide. In FY 20, 26% of revenue was generated from operations outside of the U.S. (17% in Europe, 2% in Canada, and 7% across other regions).

In FY 20, revenues derived from agencies of the U.S. government accounted for 33% of the total, up from 27% in FY 19. The U.S. government accounted for 79% of CMS revenue through work for the Department of Defense, intelligence agencies, and federal civilian governmental agencies.

In 2020, Jacbos launched its Climate Action Plan. Jacobs is committed to 100% renewable energy and being net carbon zero by the end of 2020. The company is also targeting net carbon negative status by 2030.

Jacobs is working with clients to help them achieve net zero power generation and distribution by 2030. J offers a suite of ESG project work and solutions, including aiding clients with energy storage solutions, consumption, and reduction efforts, and how clients use energy, water, transportation, etc.

The company currently generates almost $5 billion in ESG-related revenue. Within the CMS segment, we see numerous market trends positively impacting the business.

Space exploration and intelligence trends support demand for IT enhancements, security, and other digital enterprises from Jacobs. We see accelerating project awards for its software engineering to support digital modernization.

Finally, clean energy project work drives demand or the firm's industry-leading program management to help customers transition away from fossil fuels.

We expect federal infrastructure spending to be a positive growth catalyst. Federal funding for digital modernization and decarbonization of infrastructure will increase demand and market share for J, as we think J will be selected to participate in much of the project work. We see these as growth drivers for years to come, starting as soon as funding for project work is assigned.

Jacobs Engineering benefits from its role as a project manager and will be able to reap rewards on the early end of project work. Our 12-month target price is $176 per share.

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