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AECOM Stock Falls 30% in the Past Six Months: Is a Rebound Ahead?
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Key Takeaways
AECOM shares fell 30.1% in six months amid project delays, execution issues and weaker cash generation.
AECOM took a $337 million pre-tax charge as subcontractor productivity delays raised project costs.
Record backlog hit $27.8 billion, while fiscal 2027 earnings are estimated to rebound 33.7%.
Shares of AECOM (ACM - Free Report) , a leading global infrastructure consulting firm, have witnessed a sharp pullback, declining 30.1% over the past six months. The stock has underperformed the Zacks Engineering - R and D Services industry’s 2.7% gain, the broader Zacks Construction sector’s 4% drop and the S&P 500 Index’s 16% rise over the same period.
The stock’s weakness reflects heightened investor concerns surrounding project execution, delayed project starts, near-term cash-flow pressures, geopolitical uncertainty and cost inflation. AECOM is working through challenges in its Construction Management business, where weaker-than-expected subcontractor productivity has delayed completion timelines and increased expected costs. At the same time, government-related project timing remains uncertain, while the ongoing Middle East conflict continues to weigh on tourism- and hospitality-related activity. These pressures have slowed near-term NSR growth and are expected to keep cash flow under pressure into fiscal 2027. Higher project-related cash usage could also lift interest expense, while inflation remains a broader risk to labor, subcontractor and project costs.
ACM’s Six-Month Price Performance
Image Source: Zacks Investment Research
Over the past six months, ACM has also underperformed a few of its close market peers, including Sterling Infrastructure, Inc. (STRL - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Comfort Systems USA, Inc. (FIX - Free Report) , which gained 21.3%, 1.8% and 16%, respectively.
Although near-term risks remain, AECOM’s mid- and long-term growth prospects are supported by multiyear public infrastructure spending programs, record backlog that provides strong revenue visibility, and continued investments in proprietary AI, Advisory and Program Management capabilities.
Factors Hurting AECOM’s Prospects
AECOM’s Construction Management Issues Weigh on Near-Term Results: AECOM’s biggest near-term concern is the execution setback in its Construction Management business. The company recorded a $337 million pre-tax charge in the third quarter of fiscal 2026 tied to a delayed project after subcontractor productivity fell below expectations, raising completion costs and pushing substantial completion into the second quarter of fiscal 2027. AECOM is pursuing claims related to the project, but the resolution process could take several years.
Public-sector disruptions, including U.S. federal government shutdowns, have previously affected project awards and execution timing. The third-quarter fiscal 2026 outlook still relies on multi-year public programs, including remaining IIJA funding and the next Surface Transportation Reauthorization. AECOM derived approximately 50% of fiscal 2025 revenues from government entities, up from 46% in fiscal 2024, 43% in fiscal 2023 and 41% in fiscal 2022.
Weak Cash Generation Adds to Near-Term Execution Risks: The affected Construction Management projects are also weighing materially on cash generation. For the first nine months of fiscal 2026, operating cash flow fell to $169.2 million from $625.5 million a year earlier, while capital expenditures increased to $99.9 million from $74.6 million. The company now expects full-year free cash flow of approximately $300 million, with project-related cash usage remaining a headwind through the first half of fiscal 2027. Higher expected average debt balances and lower cash levels are also projected to increase fiscal 2027 net interest expense by $30-$35 million.
Macroeconomic and Geopolitical Risks Weigh on Growth: AECOM also faces external risks from geopolitical uncertainty, inflation and government-related project timing. The ongoing conflict in the Middle East continues to weigh on tourism- and hospitality-related activity, while transportation growth remains uneven in some international markets. Management has indicated that these conditions are contributing to weaker near-term NSR growth in parts of the International business.
AECOM’s sizeable public-sector exposure also leaves project activity sensitive to government funding decisions, appropriations, shutdowns and changes in policy priorities. Delays in approvals or project starts could slow backlog conversion and defer revenue recognition, particularly across large infrastructure programs. The company’s risk disclosures also identify inflation, interest-rate movements, currency fluctuations and broader economic weakness as factors that could pressure project costs, client spending and profitability.
Earnings Estimate Trend of ACM
ACM’s earnings estimates for fiscal 2026 have moved downward to $4.48 per share over the past 60 days and the same for fiscal 2027 have declined to $5.99 over the past 30 days. The revised estimates for fiscal 2026 imply a year-over-year decline of 14.8%, followed by growth of 33.7% in fiscal 2027, pointing to expectations for a meaningful earnings recovery next year.
Image Source: Zacks Investment Research
Meanwhile, earnings for Sterling Infrastructure, EMCOR Group and Comfort Systems USA are projected to increase 84%, 29.4% and 65%, respectively, this year.
AECOM’s backlog reached a record $27.8 billion in the fiscal third quarter, up 13%, supported by record quarterly wins of $4.2 billion and a 1.6x book-to-burn ratio. The company continues to benefit from broad-based demand across transportation, water, energy, defense and data centers, with the latter remaining one of its fastest-growing private-sector businesses. These opportunities span key markets in the United States, Canada, the U.K. and Australia, supporting longer-term growth visibility.
AECOM’s capital-allocation framework also provides support. The company has returned more than $3.5 billion to its shareholders since September 2020 and continues to target 100%+ cumulative free cash flow conversion from fiscal 2026 through fiscal 2029, along with double-digit annual per-share dividend growth.
ACM Stock Trades at a Discount
ACM stock is currently trading at a discount to its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 10.58, as the trend lines below suggest.
ACM P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Can AECOM Stock Recover From Its Six-Month Slide?
AECOM’s decline over the past six months reflects mounting near-term concerns. Execution setbacks in the Construction Management business, project delays, weaker cash generation, higher expected interest expense and geopolitical uncertainty continue to pressure the outlook. The $337 million project charge and cash outflows expected into fiscal 2027 further highlight execution and financial risks.
Although record backlog, strong infrastructure demand and opportunities across transportation, water, defense, energy and data centers support AECOM’s longer-term prospects, these positives are currently overshadowed by near-term challenges. The stock’s discounted valuation may appear attractive, while management’s long-term margin, earnings and cash-flow targets offer recovery potential. However, improved project execution and cash conversion are needed to support a more durable rebound.
The earnings revision trend also remains unfavorable. Fiscal 2026 and 2027 earnings estimates have moved lower, with fiscal 2026 earnings expected to decline 14.8% before rebounding 33.7% in fiscal 2027. This negative revision trend, coupled with lingering Construction Management and cash-flow risks, warrants caution. Overall, investors may want to avoid ACM for now, given its Zacks Rank #5 (Strong Sell), until greater clarity emerges around project execution, cash-flow normalization and earnings estimate revisions.
View the Zacks #1 Rank List
Image: Bigstock
AECOM Stock Falls 30% in the Past Six Months: Is a Rebound Ahead?
Key Takeaways
Shares of AECOM (ACM - Free Report) , a leading global infrastructure consulting firm, have witnessed a sharp pullback, declining 30.1% over the past six months. The stock has underperformed the Zacks Engineering - R and D Services industry’s 2.7% gain, the broader Zacks Construction sector’s 4% drop and the S&P 500 Index’s 16% rise over the same period.
The stock’s weakness reflects heightened investor concerns surrounding project execution, delayed project starts, near-term cash-flow pressures, geopolitical uncertainty and cost inflation. AECOM is working through challenges in its Construction Management business, where weaker-than-expected subcontractor productivity has delayed completion timelines and increased expected costs. At the same time, government-related project timing remains uncertain, while the ongoing Middle East conflict continues to weigh on tourism- and hospitality-related activity. These pressures have slowed near-term NSR growth and are expected to keep cash flow under pressure into fiscal 2027. Higher project-related cash usage could also lift interest expense, while inflation remains a broader risk to labor, subcontractor and project costs.
ACM’s Six-Month Price Performance
Image Source: Zacks Investment Research
Over the past six months, ACM has also underperformed a few of its close market peers, including Sterling Infrastructure, Inc. (STRL - Free Report) , EMCOR Group, Inc. (EME - Free Report) and Comfort Systems USA, Inc. (FIX - Free Report) , which gained 21.3%, 1.8% and 16%, respectively.
Although near-term risks remain, AECOM’s mid- and long-term growth prospects are supported by multiyear public infrastructure spending programs, record backlog that provides strong revenue visibility, and continued investments in proprietary AI, Advisory and Program Management capabilities.
Factors Hurting AECOM’s Prospects
AECOM’s Construction Management Issues Weigh on Near-Term Results: AECOM’s biggest near-term concern is the execution setback in its Construction Management business. The company recorded a $337 million pre-tax charge in the third quarter of fiscal 2026 tied to a delayed project after subcontractor productivity fell below expectations, raising completion costs and pushing substantial completion into the second quarter of fiscal 2027. AECOM is pursuing claims related to the project, but the resolution process could take several years.
Public-sector disruptions, including U.S. federal government shutdowns, have previously affected project awards and execution timing. The third-quarter fiscal 2026 outlook still relies on multi-year public programs, including remaining IIJA funding and the next Surface Transportation Reauthorization. AECOM derived approximately 50% of fiscal 2025 revenues from government entities, up from 46% in fiscal 2024, 43% in fiscal 2023 and 41% in fiscal 2022.
Weak Cash Generation Adds to Near-Term Execution Risks: The affected Construction Management projects are also weighing materially on cash generation. For the first nine months of fiscal 2026, operating cash flow fell to $169.2 million from $625.5 million a year earlier, while capital expenditures increased to $99.9 million from $74.6 million. The company now expects full-year free cash flow of approximately $300 million, with project-related cash usage remaining a headwind through the first half of fiscal 2027. Higher expected average debt balances and lower cash levels are also projected to increase fiscal 2027 net interest expense by $30-$35 million.
Macroeconomic and Geopolitical Risks Weigh on Growth: AECOM also faces external risks from geopolitical uncertainty, inflation and government-related project timing. The ongoing conflict in the Middle East continues to weigh on tourism- and hospitality-related activity, while transportation growth remains uneven in some international markets. Management has indicated that these conditions are contributing to weaker near-term NSR growth in parts of the International business.
AECOM’s sizeable public-sector exposure also leaves project activity sensitive to government funding decisions, appropriations, shutdowns and changes in policy priorities. Delays in approvals or project starts could slow backlog conversion and defer revenue recognition, particularly across large infrastructure programs. The company’s risk disclosures also identify inflation, interest-rate movements, currency fluctuations and broader economic weakness as factors that could pressure project costs, client spending and profitability.
Earnings Estimate Trend of ACM
ACM’s earnings estimates for fiscal 2026 have moved downward to $4.48 per share over the past 60 days and the same for fiscal 2027 have declined to $5.99 over the past 30 days. The revised estimates for fiscal 2026 imply a year-over-year decline of 14.8%, followed by growth of 33.7% in fiscal 2027, pointing to expectations for a meaningful earnings recovery next year.
Image Source: Zacks Investment Research
Meanwhile, earnings for Sterling Infrastructure, EMCOR Group and Comfort Systems USA are projected to increase 84%, 29.4% and 65%, respectively, this year.
Factors Supporting AECOM’s Momentum Despite Near-Term Risks
AECOM’s backlog reached a record $27.8 billion in the fiscal third quarter, up 13%, supported by record quarterly wins of $4.2 billion and a 1.6x book-to-burn ratio. The company continues to benefit from broad-based demand across transportation, water, energy, defense and data centers, with the latter remaining one of its fastest-growing private-sector businesses. These opportunities span key markets in the United States, Canada, the U.K. and Australia, supporting longer-term growth visibility.
AECOM’s capital-allocation framework also provides support. The company has returned more than $3.5 billion to its shareholders since September 2020 and continues to target 100%+ cumulative free cash flow conversion from fiscal 2026 through fiscal 2029, along with double-digit annual per-share dividend growth.
ACM Stock Trades at a Discount
ACM stock is currently trading at a discount to its industry peers, with a forward 12-month price-to-earnings (P/E) ratio of 10.58, as the trend lines below suggest.
ACM P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Can AECOM Stock Recover From Its Six-Month Slide?
AECOM’s decline over the past six months reflects mounting near-term concerns. Execution setbacks in the Construction Management business, project delays, weaker cash generation, higher expected interest expense and geopolitical uncertainty continue to pressure the outlook. The $337 million project charge and cash outflows expected into fiscal 2027 further highlight execution and financial risks.
Although record backlog, strong infrastructure demand and opportunities across transportation, water, defense, energy and data centers support AECOM’s longer-term prospects, these positives are currently overshadowed by near-term challenges. The stock’s discounted valuation may appear attractive, while management’s long-term margin, earnings and cash-flow targets offer recovery potential. However, improved project execution and cash conversion are needed to support a more durable rebound.
The earnings revision trend also remains unfavorable. Fiscal 2026 and 2027 earnings estimates have moved lower, with fiscal 2026 earnings expected to decline 14.8% before rebounding 33.7% in fiscal 2027. This negative revision trend, coupled with lingering Construction Management and cash-flow risks, warrants caution. Overall, investors may want to avoid ACM for now, given its Zacks Rank #5 (Strong Sell), until greater clarity emerges around project execution, cash-flow normalization and earnings estimate revisions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.