We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Aecom (ACM) Up 24.1% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have added about 24.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aecom due for a pullback? 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 catalysts.
AECOM Tops Q2 Earnings Estimates, Posts Record Backlog
AECOM reported second-quarter fiscal 2020 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Notably, the company witnessed the sixth consecutive quarter of substantial margin improvement in the Professional Services business, continued double-digit adjusted EBITDA growth, a record $9 billion of wins and a new all-time high backlog level.
Delving Deeper
Adjusted earnings per share of 55 cents topped the consensus mark of 53 cents by 3.8% and grew 31% year over year. However, revenues of $3,245.7 million missed the Zacks Consensus Estimate of $3,265 million by 0.6% and fell 5% year over year.
Improved profitability reflects the company’s efforts to transform itself into a higher-margin and lower-risk Professional Services business.
Segment Details
AECOM reports through three segments — Americas, which consists of the company’s business in the United States, Canada and Latin America; International, which includes the businesses in Europe, the Middle East, Africa and the Asia-Pacific regions; and AECOM Capital.
Americas revenues were down 3.9% year over year to $2,475.7 million. This was primarily due to reduction in disaster recovery activity in the U.S. Virgin Islands. Net service revenues or NSR of $933 million in the quarter remained unchanged year over year on a constant-currency organic basis.
Adjusted operating income of $146 million grew 10.6% year over year. Moreover, adjusted operating margin on an NSR basis expanded 160 basis points (bps) year over year on solid execution, continued favorable end-market trends and strong backlog performance.
International revenues dropped 8% on a year-over-year basis to $769.5 million. On a constant-currency organic basis, NSR decreased 2% from a year ago to 262 million in the quarter. Strong performance in the U.K., Australia and New Zealand businesses was offset by declines in Asia due to the COVID-19 outbreak. Adjusted operating income in the segment rose 60.9% year on year to $37 million. Adjusted operating margin on an NSR basis expanded a notable 240 bps year over year. This was attributed to improved profitability in the U.K., and investments to boost utilization and overhead efficiencies. Also, benefits from the actions undertaken to consolidate AECOM’s geographic and real estate footprint added to the positives.
AECOM Capital (ACAP) — which develops real estate, public private partnership and infrastructure projects — contributed $0.5 million to total revenues versus $1.5 million a year ago. The segment recorded operating income of $3.8 million.
Operating Highlights
Adjusted operating margin in the quarter amounted to 11.7%, up 200 bps from the year-ago level. Adjusted EBITDA also increased 16% year over year to $182 million. Adjusted EBITDA grew 16% year over year, marking the sixth consecutive quarter of double-digit growth.
At fiscal second quarter-end, the company’s total backlog was $41.61 billion, up 14% from the prior-year figure. This provides for all-time high levels of visibility with more than 3 years of trailing 12-month revenues in backlog.
New order wins during the fiscal second quarter were recorded at $8.6 billion. The company’s total book-to-burn ratio was 2.5, on account of solid performance across all the three segments. Wins in the first half of fiscal 2020 were $12 billion, reflecting a 1.7 book-to-burn ratio.
Liquidity & Cash Flow
As of Mar 31, 2020, AECOM’s cash and cash equivalents totaled $1,135.1 million compared with $885.6 million at fiscal 2019-end.
As of Dec 31, 2019, total debt (excluding unamortized debt issuance cost) was $2.15 billion, decreasing from $3.35 billion at fiscal 2019-end. Of the total debt, AECOM had $900 million of net debt and was undrawn under the $1.35-billion revolving credit facility.
Restructuring Update
AECOM is focused on the ongoing restructuring initiatives and expects to boost margins substantially, going forward. Its restructuring expenses are expected in the range of $160-$190 million. Total cash restructuring costs are projected within $185-$205 million.
Fiscal 2020 Guidance Cut
AECOM lowered its fiscal 2020 guidance. Adjusted EBITDA is now projected in the range of $700-$740 million versus $720-$760 million expected earlier. This midpoint of the guided range indicates 10% year-over-year growth. Also, it would mark the second consecutive year of double-digit adjusted EBITDA growth. The company reiterated its free cash flow projection of $100-$300 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Aecom has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Aecom has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Aecom (ACM) Up 24.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have added about 24.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aecom due for a pullback? 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 catalysts.
AECOM Tops Q2 Earnings Estimates, Posts Record Backlog
AECOM reported second-quarter fiscal 2020 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Notably, the company witnessed the sixth consecutive quarter of substantial margin improvement in the Professional Services business, continued double-digit adjusted EBITDA growth, a record $9 billion of wins and a new all-time high backlog level.
Delving Deeper
Adjusted earnings per share of 55 cents topped the consensus mark of 53 cents by 3.8% and grew 31% year over year. However, revenues of $3,245.7 million missed the Zacks Consensus Estimate of $3,265 million by 0.6% and fell 5% year over year.
Improved profitability reflects the company’s efforts to transform itself into a higher-margin and lower-risk Professional Services business.
Segment Details
AECOM reports through three segments — Americas, which consists of the company’s business in the United States, Canada and Latin America; International, which includes the businesses in Europe, the Middle East, Africa and the Asia-Pacific regions; and AECOM Capital.
Americas revenues were down 3.9% year over year to $2,475.7 million. This was primarily due to reduction in disaster recovery activity in the U.S. Virgin Islands. Net service revenues or NSR of $933 million in the quarter remained unchanged year over year on a constant-currency organic basis.
Adjusted operating income of $146 million grew 10.6% year over year. Moreover, adjusted operating margin on an NSR basis expanded 160 basis points (bps) year over year on solid execution, continued favorable end-market trends and strong backlog performance.
International revenues dropped 8% on a year-over-year basis to $769.5 million. On a constant-currency organic basis, NSR decreased 2% from a year ago to 262 million in the quarter. Strong performance in the U.K., Australia and New Zealand businesses was offset by declines in Asia due to the COVID-19 outbreak. Adjusted operating income in the segment rose 60.9% year on year to $37 million. Adjusted operating margin on an NSR basis expanded a notable 240 bps year over year. This was attributed to improved profitability in the U.K., and investments to boost utilization and overhead efficiencies. Also, benefits from the actions undertaken to consolidate AECOM’s geographic and real estate footprint added to the positives.
AECOM Capital (ACAP) — which develops real estate, public private partnership and infrastructure projects — contributed $0.5 million to total revenues versus $1.5 million a year ago. The segment recorded operating income of $3.8 million.
Operating Highlights
Adjusted operating margin in the quarter amounted to 11.7%, up 200 bps from the year-ago level. Adjusted EBITDA also increased 16% year over year to $182 million. Adjusted EBITDA grew 16% year over year, marking the sixth consecutive quarter of double-digit growth.
At fiscal second quarter-end, the company’s total backlog was $41.61 billion, up 14% from the prior-year figure. This provides for all-time high levels of visibility with more than 3 years of trailing 12-month revenues in backlog.
New order wins during the fiscal second quarter were recorded at $8.6 billion. The company’s total book-to-burn ratio was 2.5, on account of solid performance across all the three segments. Wins in the first half of fiscal 2020 were $12 billion, reflecting a 1.7 book-to-burn ratio.
Liquidity & Cash Flow
As of Mar 31, 2020, AECOM’s cash and cash equivalents totaled $1,135.1 million compared with $885.6 million at fiscal 2019-end.
As of Dec 31, 2019, total debt (excluding unamortized debt issuance cost) was $2.15 billion, decreasing from $3.35 billion at fiscal 2019-end. Of the total debt, AECOM had $900 million of net debt and was undrawn under the $1.35-billion revolving credit facility.
Restructuring Update
AECOM is focused on the ongoing restructuring initiatives and expects to boost margins substantially, going forward. Its restructuring expenses are expected in the range of $160-$190 million. Total cash restructuring costs are projected within $185-$205 million.
Fiscal 2020 Guidance Cut
AECOM lowered its fiscal 2020 guidance. Adjusted EBITDA is now projected in the range of $700-$740 million versus $720-$760 million expected earlier. This midpoint of the guided range indicates 10% year-over-year growth. Also, it would mark the second consecutive year of double-digit adjusted EBITDA growth. The company reiterated its free cash flow projection of $100-$300 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Aecom has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Aecom has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.