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AECOM's (ACM) Q1 Earnings, Revenues Beat Estimates, Up Y/Y

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AECOM (ACM - Free Report) reported first-quarter fiscal 2018 adjusted earnings per share of 57 cents, beating the Zacks Consensus Estimate of 55 cents. Also, the bottom line increased 7.5% from the year-ago tally of 53 cents. The improvement was primarily attributable to the company’s impressive top-line performance.

Revenue Performance

For the fiscal first quarter, revenues increased 12.7% to $4,910.8 million on a year-over-year basis. Moreover, revenues came ahead of the Zacks Consensus Estimate of $4,585 million.

Further, the company achieved 8% organic growth in the fiscal first quarter that reached to a new all-time high. The continued strong performance of Building Construction and Power business proved favorable for the top line.

AECOM Price, Consensus and EPS Surprise

AECOM Price, Consensus and EPS Surprise | AECOM Quote

Segment wise, Design & Consulting Services (DCS) revenues rose 5.5% year over year to $1,941.9 million. Also, on a constant currency basis, organic revenues increased 5% on the back of strong performance in the company’s transportation and water markets in the Americas. The transportation and water markets were driven by improved funding as well as continued growth across international markets.

Construction Services (CS) revenues increased 21.4% to $2,125.5 million on a year-over-year basis. On a constant currency basis, organic revenues were up 11%. Stellar performance of this segment was driven by Building Construction and Power businesses.

On the other hand, Management Services (MS) revenues registered an impressive year-over-year growth of 9.9% to $843.4 million. It also grew 10% on an organic basis, reflecting strong business momentum.

However, AECOM’s adjusted operating income in the fiscal first quarter was $158.1 million, down from the year-ago tally of $188.2 million. New order wins in the quarter totaled $6.1 billion. Also, AECOM’s total book-to-burn ratio during the quarter was 1.2%, with significant contribution from the DCS, CS and MS segments.  

At the end of the fiscal first quarter, AECOM’s total backlog was at an all-time high of $48.8 billion, up 11%, reflecting a favorable mix shift to the higher-margin DCS and MS segments. This included an impressive backlog growth in the DCS segment as well as MS segment.

Liquidity & Cash Flow

As of Dec 31, 2017, AECOM’s cash and cash equivalents summed $813.2 million, compared with $697.7 million as of Dec 31, 2016. Total debt was $3,951.7 million compared with $4,164 million on Dec 31, 2016.

AECOM generated free cash flow of $33.9 million in this quarter, down 40% year over year.

2018 Guidance

AECOM reiterated its fiscal 2018 guidance. The company continues to expect adjusted earnings per share to be in the range of $2.50-$2.90.

In terms of spending, the company continues to project to incur interest expense (excluding amortization of deferred financing fees) of $210 million and capital expenditures of $110 million.

Our Take

AECOM’s first-quarter 2018 results have been quite impressive, with substantial growth in both top and bottom-line performance. Record backlog and accelerating revenue growth proved conductive to the company’s growth.

Moreover, the company’s diversified portfolio comprises both designing and construction services. The company is also efficient in dealing with cyclical market volatility that helps it capitalize on the upside of its business during downturns. More than 70% of AECOM’s profits are generated from infrastructure and defense markets that are poised to benefit from the favorable political climate, both in the United States and abroad.

However, cyclical demand of the company’s services and currency fluctuations are likely to thwart growth, going forward. This apart, the company believes that economic conditions in many of its end-markets, including Canada, China and the Middle East, have weakened over time and may remain difficult in the near future.

AECOM carries a Zacks Rank #3 (Hold).

Stocks to Consider

A few better-ranked stocks in the same space include Boise Cascade, L.L.C. (BCC - Free Report) , Lennar Corp. (LEN - Free Report) and Jacobs Engineering Group Inc. (JEC - Free Report) . While Boise Cascade sports a Zacks Rank #1 (Strong Buy), Lennar Corporation and Jacobs Engineering Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boise Cascade has a decent earnings surprise history, surpassing estimates thrice in the trailing four quarters, with an average beat of 116.3%.

Lennar has a modest earnings surprise history, exceeding estimates thrice in the trailing four quarters, with an average beat of 4.2%.

Jacobs Engineering Group has posted earnings beat in the trailing four quarters. It boasts an average beat of 9.7%.

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