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Why Jacobs Engineering Group Scored an 11% Win Today

By Rich Smith – Nov 9, 2016 at 5:01PM

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The construction president proves a boon to engineering stocks.

President-elect Trump may put Jacobs Engineering to work -- but the incoming president isn't the only catalyst. Image source: Getty Images.

What happened

Shares of construction and engineering powerhouse Jacobs Engineering (J 1.16%) are performing well for investors today, up 11% as of 2:45 p.m. EST, and up close to 12% earlier in the day. Part of the credit for this spike in the shares goes to President-elect Donald Trump -- a well-known builder in his own right, and one expected to usher in a flood of new infrastructure construction over the next four years.

Part of the credit goes to President-elect Trump, as I say -- but not all of it.

So what

Election results aside, Jacobs Engineering is also benefiting today from some company-specific news. Specifically, the company announced today that it has landed "a string of recent contract wins" related to the Australian Government's $3.4 billion "Smart Cities Plan," through which that nation will invest "more than $3.4 billion in urban rail projects across the country."

Jacobs says it has won contracts related to Australia's Hurstbridge Rail Line Upgrade, the Pakenham Rail Depot projects in Victoria, the Bruce Highway Upgrade in Queensland, Westconnex, the Darlington Upgrade Project, the Forrestfield Airport Link, and the Sydney CBD Light Rail. When combined with the infrastructure business it might win here at home over the next four years, this has investors feeling optimistic about Jacobs stock.

Now what

Precisely how much of Australia's $3.4 billion in infrastructure spending will go directly into Jacobs Engineering's pocket remains to be seen. With roles in no fewer than seven separate projects, though, one imagines Jacobs' share will be substantial. Perhaps even substantial enough to move the needle on an $11.4 billion annual business such as Jacobs.

As to the question of whether all of this new business will juice Jacobs' stock price -- currently worth more than 32 times annual earnings, despite the fact that analysts expect Jacobs to grow profits only in the mid-single-digits over the next five years -- that remains to be seen.

Personally, I'd be cautious.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he currently ranks No. 336 out of more than 75,000 rated members.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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