AECOM Q4 Earnings Miss Estimates

Zacks

AECOM Technology Corporation (ACM) reported fourth-quarter fiscal 2013 net income of $76.6 million or 77 cents per share, falling short of the Zacks Consensus Estimate of 79 cents per share. However, the net income was a significant improvement from a net loss of $224.9 million or $2.05 per share incurred in the prior-year quarter.

AECOM reported fiscal 2013 net income at $239.2 million or $2.35 cents a share as compared to the net loss of $58.6 million or 52 cents a share in fiscal 2012.

Growth in the company’s core business primarily drove the earnings. An absence of goodwill impairment charges that had impacted the company’s year-ago results also benefited earnings for the reported quarter. AECOM’s strategies to improve account management and capital allocation were the key drivers for the year-over-year improvement. In addition, AECOM has made significant amount of share repurchases and has also made some strategically significant acquisitions in the quarter.

Revenues

AECOM reported total revenue of $2,079.1 million, marginally down 0.2% year over year. The revenues were primarily impacted by the dismal performance of the Management Support Services segment in the quarter. However, the increased demand for the company’s integrated service platform and global expertise partially offset the decline. The company’s performance in Europe, Asia and the Americas also remained positive with new orders aggregating $1.8 billion in the quarter. Revenues beat the Zacks Consensus Estimate of $2074 million by 0.2%.

The company’s revenue for fiscal 2013 declined 0.8% to $8,153.5 million, compared to the last fiscal’s figure of $8,218.2 million.

Segment Result

Professional Technical Services (:PTS) revenues in the quarter were $1.9 billion, up 2% on year-over-year basis. However, the net service revenue (NSR) decreased 5.8% to $1.1 billion due to decreased NSR demands from Americas and Australia despite gains from Europe and the emerging nations like Middle East and Asia. The segments construction services performed well in the quarter.

The Management Support Services (MSS) segment reported revenues of $220 million, which declined 15.6% year over year. The decline was due to the project repositioning initiative taken by the company to transition itself from lower-margin projects to higher-margin services.

Income and Expenses

The company’s operating income was $123.0 million in the quarter compared to a loss of $199 million in the prior-year quarter. However, gross margin fell to 6.7% from 6.9% in the prior-year quarter.

The company’s general and administration expense was $23.9 million versus $17.7 million in the prior-year quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents were $600.7 million at the quarter-end, compared with $593.8 million at the end of Sep 30, 2012. AECOM’s total debt increased to $1.2 billion at the end of fiscal 2013 compared with $1.1 billion in the last year. The company reported total equity of $2.0 billion, compared with $2.2 billion at the end of fiscal 2012.

Cash flow from operating activities declined to $160.1 million from $226.3 million in the prior-year quarter. The cash flow for fiscal 2013 was $408.6 million, down from $433.3 million in the last year. The free cash flow for fiscal 2013 also declined to $356.5 million from $370.5 million in previous fiscal.

Share Repurchase

AECOM repurchased 2 million shares for $61.6 million in the fourth quarter to bring the tally to 14.4 million shares for $373 million for fiscal 2013. At the end of the year, the company had $365 million worth share repurchase authorization.

Outlook

For fiscal 2014, AECOM projects earnings to be in the range of $2.35 to $2.45 per share. The company expects the trend in fiscal 2013 to continue in first quarter of 2014.

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

AECOM currently carries a Zacks Rank #4 (Sell). Other better-placed stocks worth considering at the moment include Jiangsu Expressway Co. Ltd. (JEXYY), Jacobs Engineering Group Inc. (JEC) and Quanta Services, Inc. (PWR). All three carry a Zacks Rank #2 (Buy).

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