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Why Is Aecom (ACM) Up 9.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aecom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AECOM reported mixed second-quarter fiscal 2022 results. Its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, earnings improved impressively despite a marginal fall in revenues.
Troy Rudd, AECOM’s CEO, stated, “We are uniquely well suited to lead as three mega trends take hold, including a global infrastructure investment renaissance, our clients’ increasingly ambitious ESG priorities, and infrastructure adaptation to a post-COVID new normal. As we look ahead, our strong backlog and pipeline, top rankings in key market sectors, and the expansion of our addressable market with advisory, program management, and digital capabilities support our expectation for accelerating NSR growth and for an at least 19% adjusted EPS CAGR through fiscal 2024 from fiscal 2021.”
Delving Deeper
During the fiscal second quarter, the company reported adjusted earnings per share of 83 cents, which topped the consensus mark of 78 cents by 6.4%. The bottom line also improved 23.9% from 67 cents reported in the prior-year quarter. The upside can be attributed to strong NSR growth, higher margins and stock repurchases under its capital allocation policy.
Revenues of $3,214 million missed the consensus mark of $3,356 million by 4.3% and declined 2% on a year-over-year basis. Meanwhile, adjusted net service revenues (“NSR”) moved up 4% for the quarter, of which the design business contributed 5% year-over-year growth.
Segment Details
During the reported quarter, Americas’ revenues came in at $2,399.9 million, down 2.8% from the prior-year quarter. NSR of $950 million in the quarter moved up 3% year over year, backed by 4% growth in the design business. The uptick was led by a high win rate, strength in market conditions, client budgets and the successful execution of backlogs and pursuits.
Adjusted operating income of $168 million was up 6% year over year. Adjusted operating margin (on an NSR basis) also expanded 50 basis points (bps) year over year to 17.7%. The upside reflected the benefits of the actions undertaken to boost margins, featuring investments in technology.
International revenues increased 2.1% year over year to $813.3 million. During the quarter, NSR increased 6% year over year to $664 million, reflecting growth in the company’s largest and most profitable geographies.
Adjusted operating income in the segment rose 18% year on year to $55 million. Adjusted operating margin (on an NSR basis) also increased 100 bps year over year to 8.3%. This marks the seventh consecutive quarter of sequential margin improvement and reflects continued progress toward achieving a double-digit margin in the International segment.
Operating Highlights
Adjusted segment operating profit for the quarter amounted to $223.2 million, up 8.4% from the year-ago quarter. The segment adjusted operating margin increased 70 bps to 13.8%, marking a record high fiscal second-quarter margin. Adjusted EBITDA also rose 10.3% year over year to $223.3million.
As of March-end, the company’s total backlog came in at $40.8 billion compared with $39.43 billion reported in the prior-year quarter. The current backlog level includes 19.3% contracted backlog growth. The book-to-burn ratio of 1.6 reflects 1.6 in the Americas and 1.5 in the International segment.
Liquidity & Cash Flow
As of Mar 31, 2022, AECOM’s cash and cash equivalents totaled $965.1 million compared with $1,299.2 million at the fiscal 2021 end.
Total debt (excluding unamortized debt issuance cost) as of Mar 31, 2022, stood at $2,230.9 million, compared with $2,235.7 million as of Sep 30, 2021. Free cash flow for the quarter was negative $17.4 million versus $3.3 million reported a year ago.
Fiscal 2022 Guidance
For fiscal 2022, the company expects adjusted earnings per share (EPS) in the range of $3.30-$3.50, up from the prior estimate of $3.20-$3.40. This indicates a 21% adjusted EPS improvement at the mid-point of the guidance from fiscal 2021 levels.
AECOM expects adjusted EBITDA guidance in the range of $880-$920 million, indicating 8% year-over-year growth at the midpoint. The company anticipates generating 6% organic NSR growth, underpinned by robust pipeline and backlog momentum and strengthening market conditions across the company’s largest markets. Also, it projects segment adjusted operating margin of 14.1%, reflecting a 30 bps increase on a year-over-year basis.
The company anticipates free cash flow in the range of $450-$650 million.
AECOM has also reiterated its long-term financial targets (through fiscal 2024). For the long term, it expects adjusted EPS of more than $4.75 and segment adjusted operating margin of 15%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, Aecom has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Aecom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Aecom is part of the Zacks Engineering - R and D Services industry. Over the past month, Jacobs Engineering (J - Free Report) , a stock from the same industry, has gained 5.8%. The company reported its results for the quarter ended March 2022 more than a month ago.
Jacobs Engineering reported revenues of $3.83 billion in the last reported quarter, representing a year-over-year change of +8.1%. EPS of $1.72 for the same period compares with $1.66 a year ago.
Jacobs Engineering is expected to post earnings of $1.86 per share for the current quarter, representing a year-over-year change of +13.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Jacobs Engineering. Also, the stock has a VGM Score of A.
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Why Is Aecom (ACM) Up 9.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aecom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AECOM (ACM - Free Report) Beats on Q2 Earnings, Reiterates FY22 View
AECOM reported mixed second-quarter fiscal 2022 results. Its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, earnings improved impressively despite a marginal fall in revenues.
Troy Rudd, AECOM’s CEO, stated, “We are uniquely well suited to lead as three mega trends take hold, including a global infrastructure investment renaissance, our clients’ increasingly ambitious ESG priorities, and infrastructure adaptation to a post-COVID new normal. As we look ahead, our strong backlog and pipeline, top rankings in key market sectors, and the expansion of our addressable market with advisory, program management, and digital capabilities support our expectation for accelerating NSR growth and for an at least 19% adjusted EPS CAGR through fiscal 2024 from fiscal 2021.”
Delving Deeper
During the fiscal second quarter, the company reported adjusted earnings per share of 83 cents, which topped the consensus mark of 78 cents by 6.4%. The bottom line also improved 23.9% from 67 cents reported in the prior-year quarter. The upside can be attributed to strong NSR growth, higher margins and stock repurchases under its capital allocation policy.
Revenues of $3,214 million missed the consensus mark of $3,356 million by 4.3% and declined 2% on a year-over-year basis. Meanwhile, adjusted net service revenues (“NSR”) moved up 4% for the quarter, of which the design business contributed 5% year-over-year growth.
Segment Details
During the reported quarter, Americas’ revenues came in at $2,399.9 million, down 2.8% from the prior-year quarter. NSR of $950 million in the quarter moved up 3% year over year, backed by 4% growth in the design business. The uptick was led by a high win rate, strength in market conditions, client budgets and the successful execution of backlogs and pursuits.
Adjusted operating income of $168 million was up 6% year over year. Adjusted operating margin (on an NSR basis) also expanded 50 basis points (bps) year over year to 17.7%. The upside reflected the benefits of the actions undertaken to boost margins, featuring investments in technology.
International revenues increased 2.1% year over year to $813.3 million. During the quarter, NSR increased 6% year over year to $664 million, reflecting growth in the company’s largest and most profitable geographies.
Adjusted operating income in the segment rose 18% year on year to $55 million. Adjusted operating margin (on an NSR basis) also increased 100 bps year over year to 8.3%. This marks the seventh consecutive quarter of sequential margin improvement and reflects continued progress toward achieving a double-digit margin in the International segment.
Operating Highlights
Adjusted segment operating profit for the quarter amounted to $223.2 million, up 8.4% from the year-ago quarter. The segment adjusted operating margin increased 70 bps to 13.8%, marking a record high fiscal second-quarter margin. Adjusted EBITDA also rose 10.3% year over year to $223.3million.
As of March-end, the company’s total backlog came in at $40.8 billion compared with $39.43 billion reported in the prior-year quarter. The current backlog level includes 19.3% contracted backlog growth. The book-to-burn ratio of 1.6 reflects 1.6 in the Americas and 1.5 in the International segment.
Liquidity & Cash Flow
As of Mar 31, 2022, AECOM’s cash and cash equivalents totaled $965.1 million compared with $1,299.2 million at the fiscal 2021 end.
Total debt (excluding unamortized debt issuance cost) as of Mar 31, 2022, stood at $2,230.9 million, compared with $2,235.7 million as of Sep 30, 2021. Free cash flow for the quarter was negative $17.4 million versus $3.3 million reported a year ago.
Fiscal 2022 Guidance
For fiscal 2022, the company expects adjusted earnings per share (EPS) in the range of $3.30-$3.50, up from the prior estimate of $3.20-$3.40. This indicates a 21% adjusted EPS improvement at the mid-point of the guidance from fiscal 2021 levels.
AECOM expects adjusted EBITDA guidance in the range of $880-$920 million, indicating 8% year-over-year growth at the midpoint. The company anticipates generating 6% organic NSR growth, underpinned by robust pipeline and backlog momentum and strengthening market conditions across the company’s largest markets. Also, it projects segment adjusted operating margin of 14.1%, reflecting a 30 bps increase on a year-over-year basis.
The company anticipates free cash flow in the range of $450-$650 million.
AECOM has also reiterated its long-term financial targets (through fiscal 2024). For the long term, it expects adjusted EPS of more than $4.75 and segment adjusted operating margin of 15%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, Aecom has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Aecom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Aecom is part of the Zacks Engineering - R and D Services industry. Over the past month, Jacobs Engineering (J - Free Report) , a stock from the same industry, has gained 5.8%. The company reported its results for the quarter ended March 2022 more than a month ago.
Jacobs Engineering reported revenues of $3.83 billion in the last reported quarter, representing a year-over-year change of +8.1%. EPS of $1.72 for the same period compares with $1.66 a year ago.
Jacobs Engineering is expected to post earnings of $1.86 per share for the current quarter, representing a year-over-year change of +13.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Jacobs Engineering. Also, the stock has a VGM Score of A.