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AECOM (ACM) Q4 Earnings & Revenue Beat, Gives Solid FY23 Views

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AECOM (ACM - Free Report) reported impressive fourth-quarter fiscal 2022 results. Its earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The company’s strong performance was backed by accelerating organic growth, strong profitability and disciplined capital allocation.

Post the results, shares of the technical and management support services provider rose 2.69% on Nov 14.

Pertaining to fiscal 2023, Troy Rudd, AECOM’s CEO, stated, “As we look ahead, our guidance reflects the strength of our backlog, driven by an all-time high win rate and a returns-focused approach to allocating resources. This is balanced against varied macroeconomic trends across our markets. Importantly, the long-term growth drivers for our business are well intact, and we have built an agile organization with a proven ability to grow through periods of uncertainty.”

Delving Deeper

The company reported adjusted earnings per share (EPS) of 89 cents, beating the consensus mark of 84 cents by 6% and rising 10% from 81 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.

AECOM Price, Consensus and EPS Surprise

 

AECOM Price, Consensus and EPS Surprise

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

 

Revenues of $3.43 billion also beat the consensus mark of $3.38 billion by 1.5% and rose 2% on a year-over-year basis. Adjusted net service revenues or NSR moved up 7% to $1,589 million. The design business, which contributed 90% to total NSR, recorded year-over-year growth of 9%, marking the highest quarterly growth rate in over a decade.

Segment Details

During the reported quarter, Americas’ revenues came in at $2.62 billion, up 1% from the prior-year quarter’s levels. Net service revenues or NSR of $947 million in the quarter moved up 4% year over year, backed by 5% growth in the design business. The uptick was led by a high win rate and the successful execution of backlogs and pursuits.

Adjusted operating income of $174 million was down 5% year over year. Adjusted operating margin (on an NSR basis) also expanded 50 basis points or bps year over year to 17.7%.

International revenues increased 5% year over year to $806.7 million. During the quarter, NSR increased 13% year over year to $641 million, reflecting growth in the company’s largest and most profitable geographies driven by a strong backlog and continued pipeline growth.

Adjusted operating income in the segment rose 26% year on year to $58 million. Adjusted operating margin (on an NSR basis) also increased 160 bps year over year to 9%. This marks the ninth consecutive quarter of sequential margin improvement and reflects continued progress toward achieving a double-digit margin in the International segment.

AECOM Capital contributed $0.43 million to the quarterly revenues versus $0.36 million a year ago.

Operating Highlights & Backlogs

Adjusted segment operating profit for the quarter amounted to $207 million, up 9% from the year-ago quarter’s level. The segment’s adjusted operating margin declined 30 basis points to 14.6%. Adjusted EBITDA also rose 7% year over year to $241 million.

As of September-end, the company’s total backlog came in at $40.18 billion (including 5% growth in the design business) compared with $38.58 billion reported in the prior-year quarter. The current backlog level includes 53.2% contracted backlog growth. The book-to-burn ratio of 1.2 reflects a 1.2 contribution from the Americas and 1.1 from the International.

Liquidity & Cash Flow

At fiscal 2022-end, AECOM’s cash and cash equivalents totaled $1.23 billion compared with $1.17 billion at the fiscal 2021 end. Total debt (excluding unamortized debt issuance cost) as of Sep 30, 2022, stood at $2.24 billion compared with $2.22 million as of Sep 30, 2021.

For the full year, operating cash flow of $714 million. Free cash flow in the quarter was $257 million, down 14% from the year-ago quarter’s levels.

Fiscal 2022 Highlights

AECOM reported adjusted EPS of $3.47, up 23% year over year. Revenues of $13.15 billion slipped 1%, but NSR rose 5% year over year. Adjusted segment operating margin came in at 14.2%, up 40 bps from fiscal 2021. Adjusted EBITDA also increased 9% year over year to $900 million.

Fiscal 2023 Guidance

For next year, the company anticipates generating 8% organic NSR growth (4% for actual NSR), underpinned by robust momentum in the Professional Services business.

The company expects adjusted EPS in the range of $3.55-$3.75. This indicates a 10% improvement from fiscal 2022 levels on a constant-currency basis, considering the mid-point of the guidance.

Also, it projects an adjusted operating margin of 14.6%, suggesting a 40 basis points increase on a year-over-year basis. AECOM expects adjusted EBITDA guidance in the range of $935-$975 million, indicating 10% year-over-year growth at the midpoint.

The company anticipates free cash flow in the range of $475-$675 million, an average fully diluted share count of 141 million and an effective tax rate of 24-26%.

Long-Term Views

AECOM 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%.

Also, it raised its fiscal 2024 return on invested capital target to 17% from 15% expected earlier. This reflects strong margin performance and working capital management. The company remains optimistic about surpassing its long-term guidance on the back of accelerating organic NSR growth and continued margin expansion. The benefits of its Think and Act Globally strategy and strong business execution are helping its profitability.

Zacks Rank & Peer Releases

AECOM currently carries a Zacks Rank #4 (Sell).

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

KBR, Inc. (KBR - Free Report) reported mixed third-quarter 2022 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Nonetheless, the increasing global importance of national security, energy security, energy transition and climate change have been acting as major tailwinds for KBR.

Fluor Corporation (FLR - Free Report) reported lower-than-expected third-quarter 2022 results. Notably, earnings and revenues missed the Zacks Consensus Estimate for the third consecutive quarter.

Challenges associated with FLR’s three legacy infrastructure projects weighed heavily on the results.

Quanta Services Inc. (PWR - Free Report) reported impressive results for third-quarter 2022. Adjusted earnings and revenues surpassed the Zacks Consensus Estimate and increased impressively on a year-over-year basis.

PWR’s solid third quarter results reflect the benefits of portfolio strategy and strategic capital deployment.


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