Why Is Aecom (ACM) Up 6.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Aecom Technology (ACM). Shares have added about 6.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aecom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AECOM Q4 Earnings Meet, Revenues Beat, NSR Rises Y/Y
AECOM reported decent fourth-quarter fiscal 2023 results, with earnings meeting the Zacks Consensus Estimate and revenues topping the same. On a year-over-year basis, the top and the bottom line increased, backed by double-digit organic net service revenues (NSR) growth in its design business.
Inside the Headline
The company reported adjusted earnings of $1.01 per share, in line with the Zacks Consensus Estimate. In the prior-year quarter, the company reported adjusted earnings per share (EPS) of 83 cents.
Revenues of $3.84 billion beat the consensus mark of $3.58 billion by 7.2% and rose 12% on a year-over-year basis. NSR moved up 8% to $1.73 billion.
Segment Details
Americas’ revenues came in at $2.94 billion during the reported quarter, up 12% from the prior-year quarter’s levels. Our estimate for the metric was $2.74 billion. NSR of $1 billion moved up 6% year over year, backed by 9% growth in the design business. Our estimate for the segment’s NSR was $695.6 million.
Adjusted operating income of $190 million was up 10% year over year. Adjusted operating margin (on an NSR basis) also expanded by 60 basis points (bps) year over year to 19%.
The total backlog at the fiscal fourth-quarter end was $34.9 billion versus $35.11 billion a year ago.
International revenues were up 12% year over year to $905.2 million. Our estimate for the metric was $848.7 million. During the quarter, NSR increased 11% year over year to $722.4 million, reflecting growth in the largest and most profitable markets.
Adjusted operating income in the segment rose 25% year over year to $72 million. Adjusted operating margin (on an NSR basis) also moved up 100 bps year over year to 10%. This marked the company's success in attaining a double-digit margin in the International business, achieving the set target.
The total backlog at the end of the fiscal reported quarter was $6.27 billion versus $5.07 billion from a year ago.
AECOM Capital's quarterly revenues stood at $0.54 million.
Operating Highlights
Adjusted segment operating profit amounted to $225 million, up 15% from the year-ago quarter’s level. The segment’s adjusted operating margin (NSR) improved by 60 basis points to 15.2%. The upside reflects strong execution and ongoing investments in organic growth initiatives. Adjusted EBITDA also rose 10% year over year to $252 million.
Backlogs
As of the fiscal fourth quarter end, the total backlog came in at $41.17 billion compared with $40.18 billion reported 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.
Liquidity & Cash Flow
At the fiscal fourth quarter’s end, AECOM’s cash and cash equivalents totaled $1.26 billion compared with $1.17 billion at the fiscal 2022 end. The total debt (excluding unamortized debt issuance costs) as of Sep 30, 2023, stood at $2.22 billion, in line with fiscal 2022-end.
For fiscal 2023, operating cash flow decreased 2% year over year to $696 million. Adjusted free cash flow increased 1% year over year $591 million.
Fiscal 2023 Highlights
AECOM reported adjusted EPS of $3.71, up 9% year over year. Revenues of $14.38 billion were up 9% and NSR rose 8% year over year. Adjusted segment operating margin came in at 14.7%, up 60 bps from fiscal 2022. Adjusted EBITDA also increased 9% year over year to $964 million.
Fiscal 2024 Guidance
For next year, the company anticipates generating 8-10% organic NSR growth.
The company expects adjusted EPS in the range of $4.35-$4.55. This indicates a 20% improvement from the fiscal 2023 levels on a constant-currency basis, considering the mid-point of the guidance.
Also, it projects an adjusted operating margin of 15.6%, suggesting a 90 basis points increase on a year-over-year basis. AECOM expects adjusted EBITDA guidance in the range of $1,065-$1,105 million, indicating 13% year-over-year growth at the midpoint.
The company anticipates more than 100% adjusted net income to free cash flow conversion, an average fully diluted share count of 138 million and an effective tax rate of 24-26%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
Currently, Aecom has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Aecom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Aecom belongs to the Zacks Engineering - R and D Services industry. Another stock from the same industry, Quanta Services (PWR), has gained 12.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Quanta Services reported revenues of $5.62 billion in the last reported quarter, representing a year-over-year change of +26%. EPS of $2.24 for the same period compares with $1.77 a year ago.
For the current quarter, Quanta Services is expected to post earnings of $1.97 per share, indicating a change of +17.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.4% over the last 30 days.
Quanta Services has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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