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AECOM (ACM) Q4 Earnings & Revenues Top Estimates, Shares Up

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AECOM (ACM - Free Report) reported fourth-quarter fiscal 2020 results, wherein earnings and revenues beat the respective Zacks Consensus Estimate. Impressive fiscal 2021 guidance might have lifted investors’ sentiments. Shares of AECOM gained 2.1% on Nov 16, following the earnings release.

Gaurav Kapoor, AECOM’s chief financial officer said, “We delivered strong EBITDA growth and free cash flow, which, along with the sale of the Management Services, contributedto a substantial debt reduction and the commencement of share repurchases”.

Delving Deeper

Adjusted earnings per share of 60 cents topped the consensus mark of 57 cents by 5.3% but declined 8% year over year. Revenues of $3,569 million beat the Zacks Consensus Estimate of $3,335 million by 7% and grew 1.6% year over year.

Improved profitability reflects the company’s efforts to transform itself into a higher-margin and lower-risk Professional Services business.

AECOM Price, Consensus and EPS Surprise

AECOM Price, Consensus and EPS Surprise

AECOM price-consensus-eps-surprise-chart | AECOM Quote

Segment Details

AECOM reports through three segments — Americas, which consists of the company’s business in the United States, Canada and Latin America; International, which includes the businesses in Europe, the Middle East and Africa (EMEA), along with the Asia-Pacific regions; and AECOM Capital.

Americas revenues were up 2% year over year to $2,732.3 million. However, net service revenues or NSR of $929 million for the quarter dropped 6% year over year on a constant-currency organic basis. Growth in the Construction Management business was offset by a decline in the Americas design business. Adjusted operating income of $157 million dropped 3.7% year over year.

International revenues remained unchanged on a year-over-year basis to $831.1 million. On a constant-currency organic basis, NSR decreased 11% from a year ago to $630 million for the quarter. Adjusted operating income in the segment rose 10.8% year on year to $41 million.

AECOM Capital (ACAP) — which develops real estate, public private partnership and infrastructure projects — contributed $5,579 million to total revenues versus $1,336 million a year ago. The segment recorded operating loss of $0.6 million.

Operating Highlights

Adjusted operating margin for the quarter amounted to 12.7%, down 10 basis points (bps) from the year-ago level. Adjusted EBITDA remained flat year over year to $204 million.

At fiscal 2020-end, the company’s total backlog was $41.2 billion, up 13% from the prior-year figure. New order wins during fiscal 2020 were recorded at $18.2 billion. Its total book-to-burn ratio was 1.3, on account of solid performance in the Americas business.

Fiscal 2020 Highlights

Revenues of $13,240 million declined 3% from a year ago. Adjusted segment operating margin of 12.3% improved 160 bps. Adjusted EBITDA grew 14% year over year to $746 million, marking a new high for the Professional Services business. Adjusted EPS of $2.15 grew from $1.86 a year ago.

Liquidity & Cash Flow

As of Sep 30, 2020, AECOM’s cash and cash equivalents totaled $1,708.3 million, up from $885.6 million at fiscal 2019-end.

As of fiscal 2020, total debt (excluding unamortized debt issuance cost) was $2.09 billion, down from $3.35 billion at fiscal 2019-end. Of the total debt, it had $250 million of net debt and was undrawn under the $1.35-billion revolving credit facility.

Restructuring Update

AECOM is focused on the ongoing restructuring initiatives and expects to boost margins substantially, going forward. Its restructuring expenses are expected in the range of $30-$50 million.

Fiscal 2021 Guidance

AECOM expects adjusted EBITDA in the range of $790-$830 million. The company reiterated free cash flow projection of $425-$625 million. Adjusted EPS is expected in the range of $2.55-$2.75. It expects to deliver 9% adjusted EBITDA growth and 23% adjusted EPS improvement in fiscal 2021 at the mid-point of its respective guidance ranges.

Zacks Rank

AECOM — which shares space with KBR, Inc. (KBR - Free Report) , Quanta Services, Inc. (PWR - Free Report) and Jacobs Engineering Group Inc. (J - Free Report) in the Zacks Engineering - R and D Services industry — currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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