It has been about a month since the last earnings report for Jacobs Solutions (J). Shares have added about 1.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Jacobs Solutions due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Jacobs Beats on Q2 Earnings & Revenues, to Spin Off CMS Unit

Jacobs reported second-quarter fiscal 2023 (ended Mar 31, 2023) results, with earnings and revenues surpassing their respective Zacks Consensus Estimate and rising year over year. The results reflect solid performance across the portfolio, led by People and Places Solutions operating profit growth of 21% year over year.

Importantly, the company announced its intent to separate the Critical Mission Solutions (“CMS”) business. This marks one of its strategic portfolio transformation initiatives to create higher growth and margin business portfolio focused on critical infrastructure and sustainability. Jacobs expects to complete the transaction in the second half of fiscal 2024.

Earnings & Revenue Discussion

For the reported quarter, adjusted earnings of $1.81 per share topped the consensus estimate of $1.78. Also, the reported figure was up 5% from the year-ago period.
 
Jacobs’ revenues totaled $4.1 billion, which topped the consensus mark of $4 billion and grew 6.4% year over year. Net revenues were up 5.2% year over year and up 8% in constant currency.

Backlog at the end of second-quarter fiscal 2023 amounted to $29 billion, up 4% from a year ago.

Segment Details

Revenues from the CMS segment of $1.19 billion increased 5% year over year. Yet, the segment operating profit of $93.9 million was down from $94.6 million reported a year ago. The backlog at the fiscal second-quarter end was $8.14 billion, up from $7.51 billion a year ago.

Revenues from the People & Places Solutions or P&PS segment totaled $2.35 billion, which inched up 8.4% year over year. Net revenues (excluding Pass Through Revenue) were up 7.3% year over year. Segment operating profit grew 20.5% from the prior-year quarter to $232.2 million. The backlog at the quarter end was $17.6 billion, up from $16.9 billion a year ago.

Revenues from the Divergent Solutions segment totaled $241.2 million, which grew 0.8% year over year. Divergent Solutions net revenues were down 2.8% year over year. Segment operating profit improved 45.8% from the prior-year quarter to $24.9 million. The backlog at the quarter end was $3 billion, down from $3.1 billion a year ago.

PA Consulting generated $301 million in revenues in the fiscal second quarter, up from the year-ago quarter’s figure of $294.4 million. Segment operating profit was $65.6 million, down from $68.3 million a year ago. Quarter-end backlog amounted to $319 million, up from $269 million a year ago.