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Aecom (ACM) Down 2% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Aecom due for a breakout? 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.
AECOM reported second-quarter fiscal 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate by 13.1% and 3.2%, respectively. Adjusted earnings of 69 cents per share surpassed the consensus mark of 67 cents and increased 3% on a year-over-year basis.
Revenues of $5.04 billion surpassed the consensus estimate of $4.9 billion. The figure also increased 5.2% on a year-over-year basis. AECOM achieved 7% organic growth in the quarter. This marked the 10th consecutive quarter of positive organic growth, owing to higher-margin Americas design and Management Services or MS business.
Segment Details
Design & Consulting Services (DCS) revenues rose 5% year over year to $2.1 billion. On a constant-currency basis, organic revenues also increased 8%, backed by strong performance in transportation and water markets served by the company in the Americas. Positive contribution from storm recovery efforts in the Southeastern United States and Caribbean also added to the positives. Adjusted operating income of $140 million grew 7.7% year over year.
Construction Services (CS) revenues were up 2% on a year-over-year basis to $1.9 billion. On a constant-currency basis, organic revenues improved 4% from the prior-year quarter. The upside was due to solid contribution from Civil construction and Energy businesses that offset a marginal decline suffered by the Building Construction business. Adjusted operating income in the segment was down 38.5% from a year ago to $36 million.
Management Services (MS) revenues recorded a year-over-year increase of 13.6% to $1 billion. Also, on an organic basis, revenues recorded growth of 14%, reflecting stellar improvement in backlog, and strong funding for the U.S. Departments of Defense and Energy clients. Adjusted operating income also improved 15.1% from a year ago to $61 million in the reported quarter.
AECOM Capital (ACAP), which develops real estate, public private partnership (P3) and infrastructure projects, contributed $1.5 million to its total revenues. The segment recorded operating income of $9.5 million.
Operating Highlights
AECOM’s gross margin expanded 100 bps to 3.9% from the prior-year figure. Adjusted operating income in the quarter under review amounted to $211.1 million, up 18% from the year-ago level. Adjusted EBITDA also increased 17% year over year to $235 million.
At the end of the fiscal second quarter, the company’s total backlog was recorded at $61 billion, up 22% from a year ago.
New order wins during the quarter were recorded at $8.1 billion, up 17% from the prior-year period. The company’s total book-to-burn ratio was 1.5, given 18-month extension at the Savannah River Site for the U.S. Department of Energy, a 1.2 book-to-burn ratio in the Americas design business and substantial wins in the Building Construction business.
Liquidity & Cash Flow
As of Mar 31, 2019, AECOM’s cash and cash equivalents totaled $826.9 million compared with $886.7 million on Sep 30, 2018.
As of Mar 31, 2019, total debt (excluding unamortized debt issuance cost) came in at $3.93 billion, increasing from $3.67 billion at the end of Sep 30, 2018. AECOM provided $107.4 million cash from operating activities versus $118.4 million a year ago. It had $84.9 million of free cash flow in the quarter versus $94.7 million a year ago.
Fiscal 2019 Guidance Reaffirmed
AECOM has reaffirmed its fiscal 2019 guidance, with adjusted EBITDA expectation in the range of $920-$960 million. Adjusted EPS is expected within $2.60-$2.90 per share.
The company’s adjusted interest expenses (excluding amortization of deferred financing fees) are expected to be nearly $200 million and capital expenditure is projected at about $120 million for fiscal 2019. Free cash flow is likely to be in the $600-$800 million range. AECOM is expected to incur $80-$90 million of restructuring costs in fiscal 2019.
The company is confident about the General and Administrative (G&A) reduction program, which is expected to generate $225 million of annual cost savings every year till fiscal 2021. Moreover, it expects to generate $85 million of realized savings in fiscal 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.37% due to these changes.
VGM Scores
At this time, Aecom has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Aecom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Aecom (ACM) Down 2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Aecom due for a breakout? 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.
AECOM's (ACM - Free Report) Q2 Earnings and Revenues Surpass Estimates
AECOM reported second-quarter fiscal 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate by 13.1% and 3.2%, respectively. Adjusted earnings of 69 cents per share surpassed the consensus mark of 67 cents and increased 3% on a year-over-year basis.
Revenues of $5.04 billion surpassed the consensus estimate of $4.9 billion. The figure also increased 5.2% on a year-over-year basis. AECOM achieved 7% organic growth in the quarter. This marked the 10th consecutive quarter of positive organic growth, owing to higher-margin Americas design and Management Services or MS business.
Segment Details
Design & Consulting Services (DCS) revenues rose 5% year over year to $2.1 billion. On a constant-currency basis, organic revenues also increased 8%, backed by strong performance in transportation and water markets served by the company in the Americas. Positive contribution from storm recovery efforts in the Southeastern United States and Caribbean also added to the positives. Adjusted operating income of $140 million grew 7.7% year over year.
Construction Services (CS) revenues were up 2% on a year-over-year basis to $1.9 billion. On a constant-currency basis, organic revenues improved 4% from the prior-year quarter. The upside was due to solid contribution from Civil construction and Energy businesses that offset a marginal decline suffered by the Building Construction business. Adjusted operating income in the segment was down 38.5% from a year ago to $36 million.
Management Services (MS) revenues recorded a year-over-year increase of 13.6% to $1 billion. Also, on an organic basis, revenues recorded growth of 14%, reflecting stellar improvement in backlog, and strong funding for the U.S. Departments of Defense and Energy clients. Adjusted operating income also improved 15.1% from a year ago to $61 million in the reported quarter.
AECOM Capital (ACAP), which develops real estate, public private partnership (P3) and infrastructure projects, contributed $1.5 million to its total revenues. The segment recorded operating income of $9.5 million.
Operating Highlights
AECOM’s gross margin expanded 100 bps to 3.9% from the prior-year figure. Adjusted operating income in the quarter under review amounted to $211.1 million, up 18% from the year-ago level. Adjusted EBITDA also increased 17% year over year to $235 million.
At the end of the fiscal second quarter, the company’s total backlog was recorded at $61 billion, up 22% from a year ago.
New order wins during the quarter were recorded at $8.1 billion, up 17% from the prior-year period. The company’s total book-to-burn ratio was 1.5, given 18-month extension at the Savannah River Site for the U.S. Department of Energy, a 1.2 book-to-burn ratio in the Americas design business and substantial wins in the Building Construction business.
Liquidity & Cash Flow
As of Mar 31, 2019, AECOM’s cash and cash equivalents totaled $826.9 million compared with $886.7 million on Sep 30, 2018.
As of Mar 31, 2019, total debt (excluding unamortized debt issuance cost) came in at $3.93 billion, increasing from $3.67 billion at the end of Sep 30, 2018. AECOM provided $107.4 million cash from operating activities versus $118.4 million a year ago. It had $84.9 million of free cash flow in the quarter versus $94.7 million a year ago.
Fiscal 2019 Guidance Reaffirmed
AECOM has reaffirmed its fiscal 2019 guidance, with adjusted EBITDA expectation in the range of $920-$960 million. Adjusted EPS is expected within $2.60-$2.90 per share.
The company’s adjusted interest expenses (excluding amortization of deferred financing fees) are expected to be nearly $200 million and capital expenditure is projected at about $120 million for fiscal 2019. Free cash flow is likely to be in the $600-$800 million range. AECOM is expected to incur $80-$90 million of restructuring costs in fiscal 2019.
The company is confident about the General and Administrative (G&A) reduction program, which is expected to generate $225 million of annual cost savings every year till fiscal 2021. Moreover, it expects to generate $85 million of realized savings in fiscal 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.37% due to these changes.
VGM Scores
At this time, Aecom has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Aecom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.