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Matt Arnold, industrial analyst with financial services firm Edward Jones, said in a <\/span><\/span><\/span><\/span><\/span><\/span>research note<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a> that the CMS business wasn\u2019t as lucrative as Jacobs\u2019 other core divisions.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cJacobs has exited its energy, chemical and resource business, which teneded to be more cyclical and less profitable,\u201d Arnold wrote. \u201cWe believe Jacobs’ increased focus on infrastructure, aerospace, cybersecurity and technical building projects bodes well for the future growth and profitability of the company.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n CEO Bob Pragada said the spin off will help both firms thrive.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cBy separating CMS, we will streamline our business portfolio and transform Jacobs into a higher-growth, higher-margin company more closely aligned with key global mega trends and growth sectors,\u201d said Pragada. \u201cAs an independent company, CMS will be better able to focus on its distinct strategy and operating needs, driving further momentum in its business.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Excluding CMS, Jacobs generated approximately $10.5 billion in revenue in fiscal year 2022, according to the company.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Going forward, Jacobs will focus on critical infrastructure, advanced facilities and sustainability projects. The new CMS company will target government services, national security, nuclear remediation and 5G technology work, said Pragada.\u00a0<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n The separation should be completed in the second half of fiscal 2024, according to the release.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Pragada expects a range of opportunities for growth, particularly in water and environment, energy and advanced facilities construction and transportation.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n For example, Jacobs recently won a <\/span><\/span><\/span><\/span><\/span><\/span>$500 million award<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/a> for the Donald C. Tillman Advanced Water Purification Facility in Los Angeles. Pragada said water projects, along with infrastructure work, continue to be a pacesetter with pipeline growth up materially year over year.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cOur approximately $2 billion water business continues to exceed expectations and reinforce our position in the water sector,\u201d said Pragada. \u201cIIJA has really started to incrementalize in our business. We can see it, not only in our pipeline, but in our bookings.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Jacobs\u2019 increased focus on critical infrastructure, advanced facilities, and sustainability projects bodes well for the future growth and profitability of the company, according to Arnold.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cWe believe Jacobs should benefit from a rise in infrastructure stimulus,\u201d said Arnold. \u201cIn addition, management is prioritizing growth in more attractive end-markets that offer faster growth and higher profitability.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Arnold added the separation of the CMS business \u201cmakes sense,\u201d and will focus the company on its stronger assets. He said the remaining company, excluding CMS, will have solid positions in infrastructure consulting and advanced facility design.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n \u201cThe intent of the spinoff is to focus Jacobs on its faster growing and more profitable building and infrastructure business,\u201d said Arnold. \u201cIn addition, we view the remaining business as a likely beneficiary of the infrastructure stimulus that was signed into law.\u201d<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n<\/p><\/div>\nTakeaways from earnings<\/span><\/span><\/strong><\/span><\/span><\/span><\/h3>\n