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AECOM (ACM) to Upgrade Apennine Diesel Railway in Italy

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In a bid to upgrade Italy’s historic Apennine diesel railway with hydrogen trains and boost economic growth in the region, AECOM (ACM - Free Report) signed a memorandum of understanding or MoU with Iberdrola, a Spain-based renewables group, and two Italian partners, Cinque International as well as Ancitel Energy and Environment.

Project Details

The transformation of the old diesel railway into new hydrogen technologies includes four different projects. AECOM will act as a leading engineering and program management partner.

The first project includes the upgrade of the 300km Apennine line, which runs between the town of Sansepolcro in the northern province of Arezzo and Sulmona, a city in the central province of L'Aquila. It connects a number of inland areas through four central regions. The second project includes pre-feasibility work for a new rail line powered by green hydrogen, which will link Rome with Ascoli Piceno, a province in the Marche region. The third project will assess the potential for diffused green hydrogen manufacturing activity in the region. The last project will identify areas to apply new energy and environmental technologies in post-earthquake reconstruction.

All of these projects are part of sustainable economic recovery in Italy. In 2009 and 2016, the country was badly affected by earthquakes and decades of depopulation. These projects strategically align with the European Clean Hydrogen Alliance, which aims at an ambitious deployment of hydrogen technologies by 2030 and support the EU’s commitment to reach carbon neutrality by 2050.

AECOM’s chief executive officer, Troy Rudd, said, "We are excited to bring our technical expertise in the development of smart cities and new energy to this project, working with our partners to progress this first-of-a-kind railway for Italy." He continues, "It will also drive innovation in our industry and attract people and business back to this isolated, inland area of Italy that has been impacted by seismic events in recent years. The aim of this ambitious project is to find ways to build back sustainably, using new energy technology to create job opportunities and boost economic growth for communities in the region."

Strong Backlog Level to Aid Consulting Business

AECOM is witnessing a robust pipeline of pursuits across the business. The company’s net service revenues or NSR — defined as revenues excluding subcontractors and other direct costs — have been benefiting from strength across the core transportation, water and environment markets. Although the backlog of $39.7 billion in the fiscal third quarter-end was down 4% due to tepid performance of the Construction Management business, the design business was strong (up 8% year over year).

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AECOM currently has good visibility into growth and a strong backlog in the pipeline for the upcoming quarters. The stock has rallied 31.2% in the year-to-date period compared with the industry’s 24.6% growth. Earnings estimates for fiscal 2021 have moved up 0.7% in the past 30 days, depicting analysts' optimism over bottom-line growth potential. The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s fiscal 2021 earnings indicates a 31.2% increase from 2020 level. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Some better ranked stocks in the same industry are KBR, Inc. ((KBR - Free Report) ), Altair Engineering Inc. (ALTR - Free Report) and Quanta Services Inc. (PWR - Free Report) , each carrying a Zacks Rank #2 (Buy). KBR, Altair and Quanta are likely to register earnings growth rate of 24.9%, 64.5% and 19.9% year over year in 2021.

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