AP: Jacobs Engineering (JEC) Reels After Suncor (SU) Spending Cuts

I hate when reality gets in the way of Obamamania. Via the AP

• Shares of engineering and construction company Jacobs Engineering Group Inc. tumbled Wednesday after a key customer slashed billions in spending, much of which had been slated for Jacobs.
• Suncor Energy Inc., Canada's second-largest oil sands operator, slashed planned 2009 spending in half Tuesday and shelved major expansion projects as crude oil prices tumbled.
• Among the projects being shelved is construction on an upgrader as well as work on associated facilities, work on which Pasadena, Calif.-based Jacobs had been assigned a key role.
• BMO Capital Markets analyst Avram Fisher downgraded Jacobs shares to "Underperform" from "Neutral," estimating the company's backlog with Suncor at about $1.5 billion. He said the downgrade reflects his rejection of some investors' optimism that a federal infrastructure spending initiative will lift Jacobs' revenue. "In the teeth of the worst recession in 20 years, prospects of a significant economic stimulus package makes the pro-cyclical engineering and construction space an investable theme. However, the stimulus already appears priced into the stock," he wrote in a client note.
• Fisher, who reiterated his $28 price target, also lowered his earnings per share forecast for the 12 months ending in September to $3.45, below both management's guidance of $3.55 to $4.05 and Wall Street's expectation of $3.73, according to a poll by Thomson Reuters.

I cut back some Jacobs Engineering (JEC) to about a 0.6% stake as it fell through its 50 day moving average of low $43s. I am targeting some smaller US focused names - almost bought one yesterday but my limit order was too low - just missed it. The problem with these international based names is the cut backs in projects in some portion of the backlog. Jacobs chart could turn quite nasty quite quickly if it does not regain $43.50 or so in short order - this name has basically doubled on nothing but Obama. (and hedge funds who finally ran out of inventory of stock to sell relentlessly) This is a tough one - great company, not overly expensive but on one hand subject to Obama hype and on the other subject to project cancellations.

Now again for those of you with long term horizons I'd like to reiterate my theme (agreed upon by Jim Rogers) that this era of commodity price implosion is going to kick in Economics 101 down the road. We are going to have a lack of investment now, leading to lower supplies - leading to higher prices tomorrow. By tomorrow I mean "some day in the future" - when that day is, that is anyone's guess. But we'll be complaining about high commodity prices once more... never fear.

Long Jacobs Engineering Group in fund; no personal position