We downgrade our recommendation on Jacobs Engineering (JEC) from Neutral to Underperform based on the company’s continuous decrease in backlog since the beginning of fiscal 2010, which is expected to negatively affect its top-line results in fiscal 2011.
Hence, we reduce our fiscal 2011 estimate by 3 cents. The stock is cyclical in nature, and thus the sluggish economic environment, which has reduced the client’s spending power, was the prime reason for the decrease in backlog.
Large investors fear to infuse capital in the unstable market conditions. Moreover, the company faces immense risk as it operates in a highly-competitive environment.