AECOM Beats on Q1 Earnings, Guides Up

Zacks

AECOM Technology Corporation (ACM) reported earnings of 37 cents per share for first-quarter fiscal 2014 (ended Dec 31, 2013), beating the Zacks Consensus Estimate of 36 cents by a penny. The company reported net income of $56 million which was a significant improvement from last year’s figure of $38 million.

Growth in the company’s core business as well as its joint ventures drove the earnings up. The AECOM Arabia joint venture performed impressively well in the quarter after the company gained its control, having received the required consolidation. In addition, AECOM made significant amount of share repurchases in the quarter.

Revenues

AECOM reported total revenue of $1953.9 million, down 3.1% year over year. The revenues were primarily impacted by the dismal performance of the Management Support Services segment. However, the increased demand for the company’s construction services business partially offset the decline. The company’s performance remained positive overall, with new orders aggregating $3.7 billion in the quarter, including orders from the Management Support Services segment. Revenues also fell short of the Zacks Consensus Estimate of $1,997 million.

Segment Result

Professional Technical Services (:PTS) revenues in the quarter were $1.8 billion, marginally down 0.1% on year-over-year basis. The net service revenue (NSR) also decreased 4.8% to $1.0 billion due to decreased NSR demands from Americas and Australia despite gains from Europe and emerging nations like the Middle East and Asia. The segment’s construction services performed well in the quarter.

The Management Support Services (:MSS) segment reported revenues of $184 million, which declined 25.3% year over year. The decline was due to the project repositioning initiative taken by the company to shift focus from lower-margin projects to higher-margin services.

Income and Expenses

The company’s operating income was $90.0 million in the quarter compared to $62.0 million in the previous quarter. The company’s gross margin increased to 4.0% from 3.9% in the prior-year quarter.

The company’s general and administration expense was $23.9 million versus $22.1 million in the last quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents were $681.7 million at the quarter-end, compared with $600.7 million at the end of Sep 30, 2013. AECOM’s total debt increased to $1,204 million at the end of fiscal 2013 compared with $1,173 million on Sep 30, 2013. The company reported total equity of $2,036 million, compared with $2,021 million, at the end of last quarter.

Cash flow from operating activities was $137 million. Free cash flow for the quarter was $117 million including capital expenditures of $21 million.

Share Repurchase

AECOM repurchased 0.8million shares for $24.8 million in the first quarter. At the end of the quarter, the company had share repurchase authorization worth $340 million.

Outlook

For fiscal 2014, AECOM has increased its guidance for earnings to be in the range of $2.50–$2.60 per share, compared with the previously announced guidance of $2.35–$2.45 per share. The guidance has benefited from the strengthening dollar and includes some non-recurring items.

AECOM reaffirmed its earlier guidance for cumulative free cash flow from fiscal 2013 to fiscal 2017 to be in the range of $1.3 billion to $1.8 billion.

Other Stocks to Consider

AECOM currently holds a Zacks Rank #2 (Buy). Other stocks worth considering include Altra Industrial Motion Corp. (AIMC), Fluor Corporation (FLR) and Quanta Services, Inc. (PWR), both carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on FLR
Read the Full Research Report on ACM
Read the Full Research Report on PWR
Read the Full Research Report on AIMC


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