David Hay — Friday POW!: Jacobs Solutions (J) — the infrastructure backlog the market is ignoring

One-line take: This week's POW! re-ups Jacobs Solutions (J) — first flagged March 2024 and "a dud" since (trading at almost the same ~$128 price, down ~15% from January highs). But the post-spin company is different: after the Sept-2024 Amentum spin-off it's a focused infrastructure / advanced-facilities engineer with a high-margin PA Consulting overlay (now fully owned). The case is the backlog: $26.3B, +20.6% YoY, Q1 book-to-bill 2.0x (~2 years of contracted revenue), led by data centers, semis, life sciences, water, transport — the exact end-markets the AI buildout, the Hormuz energy-security shock, and the IIJA (only ~⅓ disbursed) are driving. ~16.7× fwd EPS / ~14× EV/EBITDA / ~5–6.5% FCF yield vs E&C peers (ACM/TTEK/PWR) at 20–25×; Goldman initiated Buy $158, consensus ~$156 (~22%), Haymaker's own 21–22× FY27 math implies $168–187 (+32–47%). Three insiders bought in the open market; 68% cost-reimbursable backlog limits overrun risk. A patient 12–18-mo+ hold.

1. Stocks & names mentioned

Ticker	Name	Research	View	What he said	At
J	Jacobs Solutions	QT · SA · STK · FA	Positive	Pick of the Week (re-recommendation; first flagged Mar-2024, "a dud" since at ~the same ~$128). The post-Amentum-spin J is a focused infrastructure/advanced-facilities engineer with a wholly-owned PA Consulting (+15–16% rev). The case is the record backlog — $26.3B, +20.6% YoY, Q1 book-to-bill 2.0x, TTM 1.4x (~2yrs of contracted revenue), led by data centers/semis/life-sciences/water/transport. ~16.7× fwd EPS / ~14× EV/EBITDA / ~5–6.5% FCF yield vs E&C peers 20–25×; Goldman Buy $158, consensus ~$156 (~22% upside), Haymaker 21–22× FY27 EPS $8–8.50 → $168–187. Three insiders bought; 68% cost-reimbursable backlog. Patient 12–18-mo+ hold.	read

References only (not standalone tickers): Amentum (the 2024 spin-out of J's Critical Mission Solutions / Cyber & Intelligence units); PA Consulting (now wholly owned by J); Nvidia (Data Center Digital Twin partner); Hut 8 (River Bend AI data-center EPCM client); peers Aecom, Tetra Tech, Quanta Services (the 20–25× comps); and the Hinkley Point C / Sizewell C UK nuclear programs (project context). The bottom "Buy List" renders as an image and is not text-readable, so portfolio.json is unchanged.

2. Talking points

A "dud" worth re-recommending

First highlighted March 2024 and, blunt admission, "it's been a dud" — trading at almost the exact price today (~$128), down ~15% from the January high of $151 even as the business "experienced quite a bit of change."
Self-criticism: the 2024 breakout "worked well… for a while" — they should have trimmed in Q3 2025 ("perhaps we were guilty of overexuberance with the J story"). A lesson in harvesting gains post-breakout.

The business after the restructuring

The Sept-2024 spin-off of Critical Mission Solutions and Cyber & Intelligence into Amentum left a focused two-segment company: Infrastructure & Advanced Facilities (water, life sciences, data centers, semis, transport, nuclear) plus PA Consulting (UK innovation/transformation advisory; clients incl. Microsoft, Unilever, UK National Security).
Full ownership of PA lets J consolidate its revenue/margin and offer rare "end-to-end" capability from strategy through engineering design and delivery.

The backlog is the case — $26.3B, +21%, 2.0x book-to-bill

$26.3B backlog (+20.6%) ≈ more than two years of contracted revenue for a ~$12B-net-revenue company; "not speculative pipeline" — signed contracts with governments, utilities, pharma, tech and defense. TTM book-to-bill 1.4x ($1.40 won per $1 recognized) and accelerating.
Q1 growth led by life sciences, data centers, semis, water and transport — the AI-buildout / energy-security / supply-chain-resilience / water-underinvestment end-markets. Only ~⅓ of the $1.2T IIJA is disbursed; the rest flows over coming years. Mid-East infrastructure damage is a potential award-surge catalyst.

The data-center / AI angle

Won the Hut 8 River Bend AI/HPC data-center EPCM; partnered with Nvidia on a "Data Center Digital Twin" to design/simulate/optimize AI data centers — positioning J as the technical advisor where physical infrastructure meets AI-native operations as hyperscalers commission hundreds of billions in capacity.

"Headwinds" that are actually tailwinds

J is being sold with the industrial/mid-cap complex on government-cut and tariff fears, but the two live crises — the "SaaSpocalypse" (AI buildout) and the Hormuz energy shock — are both tailwinds for J's end-markets.
The Hormuz shock made energy security a durable national priority: nuclear, LNG, water and coastal protection programs are accelerating. J is on Sizewell C, the lead engineer on the Texas Gulf Coast storm-surge barrier, and holds 1,000–5,000 employees in Saudi Arabia (lead design partner on Vision 2030 giga-projects — The Mukaab, King Salman International Airport).
Hyperscalers/enterprises are spending $400–500B on AI infrastructure in 2026; that capital needs engineers to design, permit and build it — Q1 inquiry/engagement levels were "the highest it has ever seen."

Valuation — paying little for the backlog

~16.7× fwd EPS (FY26 midpoint $7.13) and ~14× EV/EBITDA vs E&C peers (Aecom, Tetra Tech, Quanta) at 20–25×. FY26 FCF-margin guide 7.0–8.5% → $770M–$1B FCF, ~5–6.5% FCF yield on a ~$15B cap with 15%+ EPS growth. Debt ~$1.4B vs $1.2B EBITDA (leverage <1.2x).
≥60% of FCF returned to holders; share count down 3.1% YoY; dividend +12.5% in Q1. Goldman Buy $158, RBC Outperform $156, consensus ~$156 (~22%); Haymaker's 21–22× FY27 EPS $8–8.50 math → $168–187 (+32–47%). Value Line earnings-predictability 90/100.

Arguing the other side

Execution risk on a huge, complex multi-year backlog — J's Hinkley Point C is "a cautionary tale" (3× over cost and schedule). Mitigant: 68% of continuing-ops revenue is cost-reimbursable and fixed-price-at-risk was 0% of FY25 revenue.
Government-budget risk: ~⅔ of revenue traces to government clients amid DOGE-style scrutiny. PA Consulting integration (~£1.825B initial + $1.3B notes for the rest) across 60k employees must become a margin driver, not just a "strategic springboard."
Counterpoint: at <17× fwd EPS / 14× EV/EBITDA / a 2x+ growing backlog, much skepticism is already priced; four straight beats, two straight raises, and three insiders buying argue against a worried management.

3. In plain English

J — Jacobs Solutions Positive

Jacobs is the engineering firm governments and big companies hire when a project is too complex or too important to give to an ordinary contractor — think water systems, nuclear plants, semiconductor fabs, AI data centers and coastal flood barriers. Haymaker first recommended it two years ago and it went nowhere ("a dud"), so this is a do-over. The reason to look again: the company is cleaner now (it spun off its messy government-services and cyber units in 2024 and fully bought its high-margin UK consulting arm, PA Consulting), and its order book is exploding. It has $26.3 billion of signed contracts — more than two years' worth of revenue — growing 21% a year, and winning $1.40 of new work for every $1 it books. Those orders are concentrated in exactly the things getting the most spending right now: AI data centers, chip plants, drug factories, and water.

The argument is that the stock is cheap for what's in that order book — about 17 times next year's earnings versus rivals at 20–25 times, with a ~5–6% free-cash-flow yield while profits grow 15%+. Two scary global stories actually help Jacobs: the AI spending boom needs someone to build the physical buildings, and the Middle East energy shock is pushing governments to fast-track nuclear, gas and water projects — J is already on many of them. The main risk is botching a giant project (its Hinkley Point nuclear job ran badly over budget), but most of its contracts are "cost-reimbursable," meaning the client absorbs overruns. Insiders (the CFO and two directors) have been buying their own stock — usually a good sign. This is a patient 12–18-month-plus hold, not a quick trade.

Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.