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AECOM (ACM) Down 4.2% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for AECOM (ACM - Free Report) . Shares have lost about 4.2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ACM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AECOM Q2 Earnings Surpass Estimates, Revenues Up Y/Y

AECOM reported second-quarter fiscal 2018 adjusted earnings per share of 67 cents, beating the Zacks Consensus Estimate of 65 cents.

However, the bottom line declined 24.7% from the year-ago tally of 89 cents.

Revenues in Detail

In the quarter under review, revenues increased 8.2% to $4,791 million on a year-over-year basis. Also, the top-line figure came ahead of the Zacks Consensus Estimate of $4,785 million.

Moreover, AECOM achieved 5% organic growth in the quarter, which marked the sixth successive quarter of positive organic growth. Strength in the company’s transportation and water markets as well as continued strong performance of its Building Construction business drove the top line.

Segment-wise, Design & Consulting Services (DCS) revenues rose 7.3% year over year to $2,004.7 million. On a constant-currency basis, organic revenues increased 5% backed by strong performance at the company’s transportation and water markets in the Americas. This impressive performance can be attributed to improved funding and a strong backlog position.

Construction Services (CS) revenues were up 9% to $1,888.3 million on a year-over-year basis. On a constant-currency basis, organic revenues rose 4%. Solid performance of this segment was driven by Building Construction businesses.

Management Services (MS) revenues registered a year-over-year increase of 8.6% to $897.8 million. On an organic basis, the metric grew 9%, reflecting stellar performance across its portfolio of projects.

However, AECOM’s adjusted operating income in the quarter under review amounted to $179 million, down from the year-ago tally of $188.5 million. New order wins in the quarter totaled $6.9 billion. The company’s total book-to-burn ratio was 1.4%, with significant contribution from all its three segments.

At the end of the fiscal second quarter, AECOM’s total backlog was at an all-time high of $50 billion, up 18%, reflecting a favorable mix shift to the higher-margin DCS and MS segments. This included a solid backlog position in the DCS segment and the MS segment.

Liquidity & Cash Flow

As of Mar 31, 2018, AECOM’s cash and cash equivalents summed $867.2 million compared with $802.4 million as of Sep 30, 2017.

As of Mar 31, 2018, total debt (excluding unamortized debt issuance cost) came in at $3,999.1 million compared with $4,261.5 million on Mar 31, 2017. AECOM generated free cash flow of $94.7 million in the reported quarter.

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 expect interest expenses (excluding amortization of deferred financing fees) of $210 million and capital expenditures of $110 million for 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.

AECOM Price and Consensus

 

AECOM Price and Consensus | AECOM Quote

VGM Scores

At this time, ACM has an average Growth Score of C and a grade with the same score on the momentum front. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, ACM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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