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AECOM (ACM) Wins Design Contract for Saudi Arabia's NEOM

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AECOM (ACM - Free Report) has clinched a contract to serve NEOM, a new model for urbanization and sustainability located in the northwest region of Saudi Arabia.

Per the contract, AECOM will design the transport and utilities backbone infrastructure for NEOM. Additionally, its scope will include environmental and geotechnical support.

As part of Saudi Vision 2030, NEOM is set to become one of the world’s leading destinations to attract talent and investment. It is envisioned to bring about economic changes in the Kingdom with a new model for urbanization and sustainability.

Ian Laski, AECOM Arabia’s president and chief executive, said, “We are fully committed to supporting the goals of Saudi Vision 2030 and this agreement is testament to our local presence, global reach and track record of delivering projects that enable economic diversification in the Kingdom."

Favorable Infrastructure Spending Trend Beyond the Border

AECOM’s diversified portfolio, which comprises designing and construction services, is spread across a number of key markets. In Saudi Arabia, AECOM has invested resources to take advantage of a robust set of opportunities that include the $500-billion NEOM development. During the fiscal third quarter, AECOM witnessed more than $100 million win, which demonstrates its commercial success and diversifies its work on projects. In July 2019, AECOM was appointed to provide project management consultancy services for Phase 1 construction activities in NEOM.

It is witnessing robust prospects in all segments. The company’s net service revenues or NSR — defined as revenues excluding subcontractor and other direct costs — have been benefiting from strength across core transportation, water and environment markets. Also, double-digit growth in Construction Management adds to the bliss.

Its backlog of $41.5 billion at fiscal third quarter-end was up 116% from the prior-year period. New order wins during the quarter were recorded at $3.2 billion. The company’s solid backlog levels, which are a key indicator of future revenue growth, indicate significant opportunities in the forthcoming quarters. In a nutshell, it remains on track with the five-year financial plan through fiscal 2022 to deliver more than 5% revenue CAGR, at least 9% adjusted EBITDA CAGR, 12-15% adjusted EPS CAGR and not less than $3.5 billion of cumulative free cash flow.

Notably, shares of AECOM have surged 39.2% over the past six months compared with the industry’s 26.6% rally. The company has been benefiting from strong backlog, encouraging infrastructure spending by the federal government (domestic and internal), as well as cost-reduction efforts. Also, the price performance was backed by a solid earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in 10 of the trailing 12 quarters.


 

AECOM — which shares space with Gates Industrial Corporation plc (GTES - Free Report) , Quanta Services, Inc. (PWR - Free Report) and Jacobs Engineering Group Inc. (J - Free Report) in the industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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