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AECOM Wins Contract to Support Nuclear Deterrence Program

Zacks Equity Research

AECOM ACM has inked a deal with AWE plc. to be the delivery partner for the latter’s Nuclear Capability project. The contract, namely AECOM, will support the U.K. government’s nuclear deterrence program. The company’s Management Services ("MS") segment has an expertise in demonstrating project management and nuclear decommissioning across the world.

Per the contract, this Los Angeles-based engineering firm will decommission as well as demolish the existing facilities, and build new ones. Also, the contract includes management and transportation of the required materials throughout the sites.

The deal has an initial commitment of approximately $3 million till 2020. Moreover, the contract value is expected to rise to nearly $500 million in the next 12 years. The contract value will be added to the company’s backlog in the first quarter of fiscal 2019.  

Over the last few quarters, AECOM’s diversified business is witnessing robust prospects across the segments. Notably, as of Sep 30, 2018, the company recorded a new all-time high backlog of $54.1 billion, reflecting a 14% year-over-year increase. The solid backlog indicates robust opportunity for the company in the forthcoming quarters.

New order wins in fiscal 2018 were up 23% from the prior-year quarter. Its total book-to-burn ratio was 1.3, given solid contribution from all the segments. The MS segment recorded an impressive 2.5 book-to-burn ratio. Particularly in the MS segment, a record high backlog was recorded, increasing 120% since the beginning of fiscal 2017.

Meanwhile, shares of AECOM have outperformed its industry over the past three months. Earnings estimates for the to-be-reported quarter have also moved up 3.8% in the past 60 days, raising analysts’ optimism surrounding the company’s earnings growth potential.

Zacks Rank &Key Picks

Currently, AECOM carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the Zacks Construction sector include Gates Industrial Corporation PLC GTES, Lennox International Inc. LII, and Great Lakes Dredge & Dock Corporation GLDD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gates Industrial, Lennox and Great Lakes’ earnings for the current year are expected to increase 44.6%, 18.9% and 111%, respectively.

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