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Aecom (ACM) Soars to 52-Week High, Time to Cash Out?

Zacks Equity Research
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Have you been paying attention to shares of AECOM (ACM)? Shares have been on the move with the stock up 7.4% over the past month. The stock hit a new 52-week high of $35.76 in the previous session. AECOM has gained 32.7% since the start of the year compared to the 23.9% move for the Zacks Construction sector and the 19.8% return for the Zacks Engineering - R and D Services industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 8, 2019, Aecom reported EPS of $0.69 versus consensus estimate of $0.61 while it beat the consensus revenue estimate by 3.2%.

For the current fiscal year, Aecom is expected to post earnings of $2.78 per share on $20.65 billion in revenues. This represents a 3.73% change in EPS on a 2.46% change in revenues. For the next fiscal year, the company is expected to earn $3.18 per share on $21.13 billion in revenues. This represents a year-over-year change of 14.57% and 2.32%, respectively.

Valuation Metrics

Aecom may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Aecom has a Value Score of A. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 12.7X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 8X versus its peer group's average of 10.2X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Aecom currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Aecom meets the list of requirements. Thus, it seems as though Aecom shares could still be poised for more gains ahead.

How Does Aecom Stack Up to the Competition?

Shares of Aecom have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Quanta Services (PWR), PulteGroup (PHM), and NVR (NVR), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Aecom. Still, the fundamentals for Aecom are promising, and it still has potential despite being at a 52-week high.


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