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AECOM (ACM) Aided by Infrastructural Funding & Solid Backlog
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AECOM’s (ACM - Free Report) is well poised for growth, courtesy of robust backlog, increasing international footprint and digital initiatives. Importantly, the U.S. administration’s intent to revive the domestic infrastructure is set to drive growth for AECOM.
The above-mentioned tailwinds helped the company to start fiscal 2023 on a solid note. In the first quarter of fiscal 2023, earnings and revenues surpassed the Zacks Consensus Estimate by 4.9% and 1.4%, respectively. The quarterly results reflect accelerating organic net service revenues or NSR growth, strong profitability and cash flow, a record design backlog and pipeline of opportunities.
Shares of ACM have gained 18.6% over the past six months, outperforming the Zacks Engineering - R and D Services industry’s growth of 17.7%. The earnings estimate for fiscal 2023 has shown improvement in the past 30 days, portraying possible prospects of the company.
Image Source: Zacks Investment Research
Let us dive into the driving factors of ACM.
Growth Drivers
AECOM is witnessing robust prospects in all its segments. AECOM currently has good visibility of strong backlog and pipelines for the upcoming quarters. The company’s solid backlog levels, which are a key indicator of future revenue growth, indicate significant opportunities in the forthcoming quarters. In the first quarter of fiscal 2023, the company’s backlog was $40.8 billion, up 5.2% from the prior-year quarter. The contracted backlog increased 1.7% year over year.
In the United States, the $1.2 trillion Infrastructure and Jobs Act marks a generational investment in America's infrastructure. This bill provides the much-needed long-term funding certainty across the company’s strongest end markets, such as transit modernization, electrification, environmental remediation and climate resilience. Also, the company is prioritizing its investments in Environmental, Social and Governance (“ESG”). The company has been benefiting from its industry-leading position in green building and green design, environmental compliance and remediation, energy efficiency and infrastructure resilience. Overall, the company’s performance demonstrates that it has been outgrowing the industry organically and capturing market share.
The company has been benefiting from solid infrastructure spending in its international market, comprising Canada, Hong Kong, Australia and the United Kingdom. Overall, the International segment’s backlog at the end of first-quarter fiscal 2023 increased 9.9% year over year, reflecting market share gains and growth visibility. In fiscal 2023 first-quarter, NSR increased 12% from the prior-year quarter. This reflected growth in the company’s largest and most profitable geographies, including Ireland, Australia, New Zealand, Hong Kong, the Middle East and the U.K. Management remains confident of attaining its goal of double-digit international margins by 2024.
AECOM recently developed and unveiled a proprietary IIJA specific digital tool. It was built organically by company experts in response to clients’ urgent demand for best positioning their projects for IIJA funding. Also, it rolled out Program Management Delivery System and Toolkit, bringing together digital tools and technical capabilities to deliver world-class program management services. ACM’s partnership with Microsoft has expanded the offering platform for its leading cloud technology PlanEngage, delivering innovation to the marketplace.
Some other top-ranked stocks in the Zacks Construction sector are:
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2. Shares of URI have gained 53.5% in the past six months. The long-term earnings growth rate of the company is 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 28.3%, respectively, from the previous year’s reported levels.
Sterling Infrastructure, Inc. (STRL - Free Report) currently carries a Zacks Rank #2. STRL has a trailing four-quarter earnings surprise of 19.3%, on average. Shares of the company have gained 64.6% in the past six months.
The Zacks Consensus Estimate for STRL’s 2023 sales indicates a 0.8% decline, while that for EPS suggests 10.8% growth.
Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Its shares have rallied 19.1% in the past six months.
The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year.
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AECOM (ACM) Aided by Infrastructural Funding & Solid Backlog
AECOM’s (ACM - Free Report) is well poised for growth, courtesy of robust backlog, increasing international footprint and digital initiatives. Importantly, the U.S. administration’s intent to revive the domestic infrastructure is set to drive growth for AECOM.
The above-mentioned tailwinds helped the company to start fiscal 2023 on a solid note. In the first quarter of fiscal 2023, earnings and revenues surpassed the Zacks Consensus Estimate by 4.9% and 1.4%, respectively. The quarterly results reflect accelerating organic net service revenues or NSR growth, strong profitability and cash flow, a record design backlog and pipeline of opportunities.
Shares of ACM have gained 18.6% over the past six months, outperforming the Zacks Engineering - R and D Services industry’s growth of 17.7%. The earnings estimate for fiscal 2023 has shown improvement in the past 30 days, portraying possible prospects of the company.
Image Source: Zacks Investment Research
Let us dive into the driving factors of ACM.
Growth Drivers
AECOM is witnessing robust prospects in all its segments. AECOM currently has good visibility of strong backlog and pipelines for the upcoming quarters. The company’s solid backlog levels, which are a key indicator of future revenue growth, indicate significant opportunities in the forthcoming quarters. In the first quarter of fiscal 2023, the company’s backlog was $40.8 billion, up 5.2% from the prior-year quarter. The contracted backlog increased 1.7% year over year.
In the United States, the $1.2 trillion Infrastructure and Jobs Act marks a generational investment in America's infrastructure. This bill provides the much-needed long-term funding certainty across the company’s strongest end markets, such as transit modernization, electrification, environmental remediation and climate resilience. Also, the company is prioritizing its investments in Environmental, Social and Governance (“ESG”). The company has been benefiting from its industry-leading position in green building and green design, environmental compliance and remediation, energy efficiency and infrastructure resilience. Overall, the company’s performance demonstrates that it has been outgrowing the industry organically and capturing market share.
The company has been benefiting from solid infrastructure spending in its international market, comprising Canada, Hong Kong, Australia and the United Kingdom. Overall, the International segment’s backlog at the end of first-quarter fiscal 2023 increased 9.9% year over year, reflecting market share gains and growth visibility. In fiscal 2023 first-quarter, NSR increased 12% from the prior-year quarter. This reflected growth in the company’s largest and most profitable geographies, including Ireland, Australia, New Zealand, Hong Kong, the Middle East and the U.K. Management remains confident of attaining its goal of double-digit international margins by 2024.
AECOM recently developed and unveiled a proprietary IIJA specific digital tool. It was built organically by company experts in response to clients’ urgent demand for best positioning their projects for IIJA funding. Also, it rolled out Program Management Delivery System and Toolkit, bringing together digital tools and technical capabilities to deliver world-class program management services. ACM’s partnership with Microsoft has expanded the offering platform for its leading cloud technology PlanEngage, delivering innovation to the marketplace.
Zacks Rank & Other Key Picks
ACM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the Zacks Construction sector are:
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2. Shares of URI have gained 53.5% in the past six months. The long-term earnings growth rate of the company is 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 28.3%, respectively, from the previous year’s reported levels.
Sterling Infrastructure, Inc. (STRL - Free Report) currently carries a Zacks Rank #2. STRL has a trailing four-quarter earnings surprise of 19.3%, on average. Shares of the company have gained 64.6% in the past six months.
The Zacks Consensus Estimate for STRL’s 2023 sales indicates a 0.8% decline, while that for EPS suggests 10.8% growth.
Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Its shares have rallied 19.1% in the past six months.
The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year.