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AECOM Inks Deal for Saudi Arabia's $500B NEOM Bay Project

Zacks Equity Research

AECOM ACM has inked a multi-year contract to provide project management consultancy or PMC services for a mega-project being developed in northwestern Saudi Arabia.

Per this contract, AECOM is entitled to facilitate project management, contract administration, technical and environmental support services, and site supervision over the entire design and construction phases of NEOM Bay.

NEOM Bay, a $500-billion project, is located in the northwest of Saudi Arabia. It will have a special economic zone and a society, with world-class education, healthcare and culture for a new way of living. Upon the completion of Phase 1, this project will cover a 45-square kilometer area and be comprised of many residential units, leisure, retail, commercial, public and entertainment facilities, with supporting infrastructure and utilities.

Infrastructure Spending Beyond the Border Aids AECOM

Majority of the U.S. government’s infrastructural plan is concentrated in the transit and water markets, where AECOM enjoys a dominant market share. In addition, the Trump administration's focus on investing in defense and cybersecurity is expected to aid the company.

Even beyond the borders, prospects of AECOM look promising. For instance, the recently announced Ontario government’s 10-year, $30-billion infrastructure funding program, under the multi-party Canada Infrastructure Program, is providing significant long-term visibility. This is likely to unlock multiple growth opportunities for the company. In addition, international design markets are likely to benefit from solid levels of U.K. infrastructure funding.

AECOM’s performance across the Asia Pacific continues to be led by strong public-sector infrastructure investment in Australia and New Zealand. In Hong Kong, long-term demand drivers are strong, including the government's recent announcement of the $70-billion mega Tomorrow Lantau project.

Markedly, the Middle East market is stabilizing and backlogs, which were previously on hold, are showing signs of returning to the market. In Saudi Arabia, AECOM, a Zacks Rank #3 (Hold) stock, invested resources to take advantage of a robust set of opportunities that include the $500-billion NEOM development.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Share Price Performance


 

AECOM’s shares have gained 39.6%, comparing favorably with its industry’s rally of 24.6% and S&P 500’s growth of 17.1% in the year-to-date period. The company's endeavors to improve profitability and de-risk its business profile by focusing more on the fastest-growing markets having more competitive advantages are expected to drive growth.

For fiscal 2019, AECOM, which shares space in the same industry with Altair Engineering Inc. ALTR, Quanta Services, Inc. PWR and Jacobs Engineering Group Inc. JEC, expects to deliver strong revenue growth, 12% adjusted EBITDA improvement at the mid-point of the guided range and 600-$800 million of free cash flow.

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