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AECOM's (ACM) Technical Services Unit Inks $12M Defense Deal

Zacks Equity Research

AECOM Technical Services Inc., a subsidiary of AECOM ACM, has clinched a contract from the U.S. Army Corps of Engineers, Concord, MA, for harmful toxic and radiologic waste consulting services. The contract, which is valued at $12 million, is expected to be completed by May 31, 2024.

Through AECOM’s Technical Services unit, the company provides a wide range of technical services to the U.S. Department of Defense and federal civilian agencies. These services include development and testing through installation, implementation, assessment, logistics and supply chain management, operations and maintenance, as well as decommissioning and closure.

Notably, more than 70% of AECOM’s profits are generated from infrastructure and defense markets that are poised to benefit from favorable political climate, both in the United States and abroad. It remains on track with its strategic actions to improve profitability and de-risk the business profile by focusing more on the fastest-growing markets having more competitive advantages.

AECOM is witnessing robust prospects in all the segments. Notably, the company achieved 7% organic growth in second-quarter fiscal 2019. This marked the 10th consecutive quarter of positive organic growth, mainly attributable to higher-margin Americas design and Management Services or MS business.

AECOM ended the first half of fiscal 2019 on a strong note, as is evident from 16% adjusted EBITDA growth. It reported record backlog of $61 billion in the fiscal second quarter, up 22% from a year ago. New order wins during second-quarter fiscal 2019 were recorded at $8.1 billion (up 17% from the prior-year period), marking the sixth consecutive quarter surpassing the $6-billion mark. The company’s solid backlog levels, which are a key indicator of future revenue growth, indicate significant opportunities in the forthcoming quarters.

This Zacks Ranked #2 (Buy) company’s shares have outperformed its industry year to date and the trend is likely to continue in the near term as well, courtesy of solid fiscal second-quarter results. Shares of AECOM have gained more than 19% in the said period compared with the industry’s collective increase of 14%. Bottom-line estimates for fiscal 2019 and 2020 have increased 1.1% and 1.6%, respectively, over the past 60 days, reflecting analysts' optimism over the stock's earnings growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For fiscal 2019, AECOM, which shares space in the Zacks Engineering – R&D Services 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 midpoint of the guidance range, and 600-$800 million of free cash flow.

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