AECOM (ACM) Gives Long-Term Financial Goals, Retains FY24 View
AECOM ACM recently introduced a long-term financial framework, underpinned by solid organic growth, a commitment to expand margins, strong free cash flow and an impressive return-based capital allocation policy.
In the long run, ACM expects to generate 5-8% organic NSR growth annually. Also, it projects an adjusted operating margin of more than 17% or growth of 20-30 basis points on an annual basis. The company expects double-digit growth in adjusted earnings and free cash flow per share.
ACM anticipates more than 100% adjusted net income to free cash flow conversion and more than 25% return on invested capital. Also, it projects double-digit dividend growth in the long term.
Troy Rudd, AECOM’s chief executive officer, stated, “Our outperformance over the last three years is the result of the competitive advantage we have built through our Think and Act Globally strategy, which has enabled us to deliver industry-leading shareholder value creation.” He added, “The strength of our new long-term financial framework is a testament to our teams, the competitive advantages of our team and elevates our ambitions beyond our industry to put us on par with the highest-value, best-in-class Professional Services Consulting firms.”
The stock inched up 0.39% in the day trading session on Dec 11.
Impressive Higher-Margin, Lower-Risk Professional Services Firm
AECOM is a leading solution provider, offering professional, technical and management solutions for diverse industries across end-markets like transportation, facilities, government and environmental, energy and water. Demand for AECOM’s technical, advisory and program management capabilities is increasing on the back of an improving funding environment, highlighted by the recent passing of the federal infrastructure bill in the United States as well as rising demand for ESG-related services.
Image Source: Zacks Investment Research
In the past three months, shares of the company have risen 11% compared with the Zacks Engineering - R and D Services industry’s 2.5% growth.
AECOM’s fourth-quarter fiscal 2023 earnings increased 13.5% on a year-over-year basis. Revenues also improved 12% from the prior-year level. Adjusted net service revenues (NSR) — defined as revenues excluding subcontractor and other direct costs — moved up 8%. The design business contributed 90% to the total NSR and recorded year-over-year growth of 8%. Adjusted EBITDA also rose 10% year over year.
The total backlog came in at $41.17 billion at the end of fiscal fourth quarter compared with $40.18 billion in the prior-year period. The current backlog level includes 54.8% contracted backlog growth. A record-high 12.7% growth in the design business backlog (on a constant currency basis) reflects solid quarterly wins and a pipeline of opportunities.
The company expects to generate 8-10% organic NSR growth in fiscal 2024.
Zacks Rank & Other Key Picks
AECOM currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks from the same industry have been discussed below.
Gates Industrial Corporation plc GTES manufactures engineered power transmission and fluid power solutions. GTES currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GTES’ expected earnings growth rate for 2023 is 10.5%. The consensus mark for GTES’ 2023 earnings has moved north to $1.26 per share from $1.21 in the past 30 days.
M-tron Industries, Inc. MPTI currently sports a Zacks Rank #1. MPTI delivered a trailing four-quarter earnings surprise of 35.6%, on average.
The Zacks Consensus Estimate for MPTI’s 2023 sales and EPS indicates growth of 30.6% and 156.7%, respectively, from the previous year's level.
Willdan Group, Inc. WLDN is a nationwide provider of professional, technical and consulting services to utilities, government agencies and private industry.
WLDN presently sports a Zacks Rank #1. Its expected earnings growth rate for 2023 is 50%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AECOM (ACM) : Free Stock Analysis Report
Willdan Group, Inc. (WLDN) : Free Stock Analysis Report
Gates Industrial Corporation PLC (GTES) : Free Stock Analysis Report
M-tron Industries, Inc. (MPTI) : Free Stock Analysis Report
