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Why Is Aecom (ACM) Down 0.8% Since Last Earnings Report?

·4 min read

A month has gone by since the last earnings report for Aecom Technology (ACM). Shares have lost about 0.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Aecom due for a breakout? 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 drivers.

AECOM's Tops Q1 Earnings Estimates, Gives Upbeat View

AECOM reported mixed first-quarter fiscal 2022 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same.

Gaurav Kapoor, AECOM’s chief financial officer, stated, “We are compounding our earnings at a high rate, built on a plan for accelerating organic NSR growth, the strong underlying profitability of the business, and our intent to continue to return cash flow to our shareholders. This confidence is reflected in our increased EPS guidance for this year.”

Delving Deeper

During the fiscal first quarter, adjusted earnings per share of 89 cents topped the consensus mark of 77 cents by 15.6%. The bottom line also improved 43.5% from 62 cents reported in the prior-year quarter.
 
In the quarter under review, revenues of $3,266.7 million missed the consensus mark of $3,472 million by 5.9% and also declined 1.4% on a year-over-year basis. Meanwhile, net service revenues or NSR moved up 5% for the quarter. This marks the fourth consecutive quarter of accelerating organic NSR growth.

Segment Details

During the fiscal first quarter, Americas revenues came in at $2,463.5 million, down 3.7% from the prior-year quarter’s levels. Net service revenues or NSR of $887.7 million for the quarter gained 2.9% year over year, backed by strength in market conditions, client budgets coupled with the successful execution of backlogs and pursuits. Adjusted operating income of $158 million was up 4% year over year. Adjusted operating margin (on an NSR basis) also expanded 30 basis points or bps year over year to 17.7%. This upside reflected the benefits of the actions undertaken to boost margins, featuring investments in technology as well as benefits from project delivery efficiencies.

During the quarter, International revenues increased 6.2% year over year to $802.4 million. NSR during the quarter increased 6.8% year over year to $654 million. Adjusted operating income in the segment rose 24% year on year to $53 million. Adjusted operating margin (on an NSR basis) also jumped 110 bps year over year to 8.2%. Actions undertaken to improve margins included investments in the business to enable more efficient delivery and strong execution.

Operating Highlights

Adjusted segment operating margin for the quarter amounted to 13.7%, up 60 bps from the year-ago quarter’s level. Adjusted EBITDA also rose 10% year over year to $208 million.

As of December-end, the company’s total backlog came in at $38.8 billion, compared with $38.6 million reported in the previous quarter. The backlog level included 15% contracted backlog growth, with increases in the Design and Construction Management businesses.

Liquidity & Cash Flow

As of Dec 31, 2021, AECOM’s cash and cash equivalents totaled $1,082.4 million compared with $1,044.7 million in the prior-year period.

Total debt (excluding unamortized debt issuance cost) as of Dec 31, 2021, stood at $2,229 million, compared with $2,090.7 million as of Dec 31, 2020.

Fiscal 2022 Guidance

For fiscal 2022, the company expects adjusted earnings per share (EPS) in the range of $3.30-$3.50, up from the prior estimate of $3.20-$3.40. This indicates a 21% adjusted EPS improvement at the mid-point of the guidance from fiscal 2021 levels. The Zacks Consensus Estimate for fiscal 2022 earnings is currently pegged at $3.30 per share.

AECOM also expects adjusted EBITDA guidance in the range of $880-$920 million, indicating 8% year-over-year growth at the midpoint. The company anticipates free cash flow in the range of $450-$650 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Aecom has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Aecom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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