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Why Is Aecom (ACM) Up 6.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have added about 6.9% 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 drivers.
AECOM reported impressive fourth-quarter fiscal 2022 results. Its earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The company’s strong performance was backed by accelerating organic growth, strong profitability and disciplined capital allocation.
Pertaining to fiscal 2023, Troy Rudd, AECOM’s CEO, stated, “As we look ahead, our guidance reflects the strength of our backlog, driven by an all-time high win rate and a returns-focused approach to allocating resources. This is balanced against varied macroeconomic trends across our markets. Importantly, the long-term growth drivers for our business are well intact, and we have built an agile organization with a proven ability to grow through periods of uncertainty.”
Delving Deeper
The company reported adjusted earnings per share (EPS) of 89 cents, beating the consensus mark of 84 cents by 6% and rising 10% from 81 cents reported in the prior-year quarter. The upside can be attributed to strong NSR growth, higher margins and stock repurchases under its capital allocation policy.
Revenues of $3.43 billion also beat the consensus mark of $3.38 billion by 1.5% and rose 2% on a year-over-year basis. Adjusted net service revenues or NSR moved up 7% to $1,589 million. The design business, which contributed 90% to total NSR, recorded year-over-year growth of 9%, marking the highest quarterly growth rate in over a decade.
Segment Details
During the reported quarter, Americas’ revenues came in at $2.62 billion, up 1% from the prior-year quarter’s levels. Net service revenues or NSR of $947 million in the quarter moved up 4% year over year, backed by 5% growth in the design business. The uptick was led by a high win rate and the successful execution of backlogs and pursuits. Adjusted operating income of $174 million was down 5% year over year. Adjusted operating margin (on an NSR basis) also expanded 50 basis points or bps year over year to 17.7%.
International revenues increased 5% year over year to $806.7 million. During the quarter, NSR increased 13% year over year to $641 million, reflecting growth in the company’s largest and most profitable geographies driven by a strong backlog and continued pipeline growth. Adjusted operating income in the segment rose 26% year on year to $58 million. Adjusted operating margin (on an NSR basis) also increased 160 bps year over year to 9%. This marks the ninth consecutive quarter of sequential margin improvement and reflects continued progress toward achieving a double-digit margin in the International segment.
AECOM Capital contributed $0.43 million to the quarterly revenues versus $0.36 million a year ago.
Operating Highlights & Backlogs
Adjusted segment operating profit for the quarter amounted to $207 million, up 9% from the year-ago quarter’s level. The segment’s adjusted operating margin declined 30 basis points to 14.6%. Adjusted EBITDA also rose 7% year over year to $241 million.
As of September-end, the company’s total backlog came in at $40.18 billion (including 5% growth in the design business) compared with $38.58 billion reported in the prior-year quarter. The book-to-burn ratio of 1.2 reflects a 1.2 contribution from the Americas and 1.1 from the International.
Liquidity & Cash Flow
At fiscal 2022-end, AECOM’s cash and cash equivalents totaled $1.23 billion compared with $1.17 billion at the fiscal 2021 end. Total debt (excluding unamortized debt issuance cost) as of Sep 30, 2022, stood at $2.24 billion compared with $2.22 million as of Sep 30, 2021. For the full year, operating cash flow of $714 million. Free cash flow in the quarter was $257 million, down 14% from the year-ago quarter’s levels.
Fiscal 2022 Highlights
AECOM reported adjusted EPS of $3.47, up 23% year over year. Revenues of $13.15 billion slipped 1%, but NSR rose 5% year over year. Adjusted segment operating margin came in at 14.2%, up 40 bps from fiscal 2021. Adjusted EBITDA also increased 9% year over year to $900 million.
Fiscal 2023 Guidance
For next year, the company anticipates generating 8% organic NSR growth (4% for actual NSR), underpinned by robust momentum in the Professional Services business. The company expects adjusted EPS in the range of $3.55-$3.75. This indicates a 10% improvement from fiscal 2022 levels on a constant-currency basis, considering the mid-point of the guidance.
Also, it projects an adjusted operating margin of 14.6%, suggesting a 40 basis points increase on a year-over-year basis. AECOM expects adjusted EBITDA guidance in the range of $935-$975 million, indicating 10% year-over-year growth at the midpoint. The company anticipates free cash flow in the range of $475-$675 million, an average fully diluted share count of 141 million and an effective tax rate of 24-26%.
Long-Term Views
AECOM reiterated its long-term financial targets (through fiscal 2024). For the long term, it expects adjusted EPS of more than $4.75 and segment adjusted operating margin of 15%.
Also, it raised its fiscal 2024 return on invested capital target to 17% from 15% expected earlier. This reflects strong margin performance and working capital management. The company remains optimistic about surpassing its long-term guidance on the back of accelerating organic NSR growth and continued margin expansion. The benefits of its Think and Act Globally strategy and strong business execution are helping its profitability.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -9.89% due to these changes.
VGM Scores
At this time, Aecom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Aecom has a Zacks Rank #3 (Hold). We expect an in-line 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, Fluor (FLR - Free Report) , has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Fluor reported revenues of $3.61 billion in the last reported quarter, representing a year-over-year change of +16.4%. EPS of $0.07 for the same period compares with $0.23 a year ago.
Fluor is expected to post earnings of $0.51 per share for the current quarter, representing a year-over-year change of +64.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fluor. Also, the stock has a VGM Score of F.
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Why Is Aecom (ACM) Up 6.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Aecom Technology (ACM - Free Report) . Shares have added about 6.9% 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 drivers.
AECOM Q4 Earnings & Revenue Beat, Gives Solid FY23 Views
AECOM reported impressive fourth-quarter fiscal 2022 results. Its earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The company’s strong performance was backed by accelerating organic growth, strong profitability and disciplined capital allocation.
Pertaining to fiscal 2023, Troy Rudd, AECOM’s CEO, stated, “As we look ahead, our guidance reflects the strength of our backlog, driven by an all-time high win rate and a returns-focused approach to allocating resources. This is balanced against varied macroeconomic trends across our markets. Importantly, the long-term growth drivers for our business are well intact, and we have built an agile organization with a proven ability to grow through periods of uncertainty.”
Delving Deeper
The company reported adjusted earnings per share (EPS) of 89 cents, beating the consensus mark of 84 cents by 6% and rising 10% from 81 cents reported in the prior-year quarter. The upside can be attributed to strong NSR growth, higher margins and stock repurchases under its capital allocation policy.
Revenues of $3.43 billion also beat the consensus mark of $3.38 billion by 1.5% and rose 2% on a year-over-year basis. Adjusted net service revenues or NSR moved up 7% to $1,589 million. The design business, which contributed 90% to total NSR, recorded year-over-year growth of 9%, marking the highest quarterly growth rate in over a decade.
Segment Details
During the reported quarter, Americas’ revenues came in at $2.62 billion, up 1% from the prior-year quarter’s levels. Net service revenues or NSR of $947 million in the quarter moved up 4% year over year, backed by 5% growth in the design business. The uptick was led by a high win rate and the successful execution of backlogs and pursuits. Adjusted operating income of $174 million was down 5% year over year. Adjusted operating margin (on an NSR basis) also expanded 50 basis points or bps year over year to 17.7%.
International revenues increased 5% year over year to $806.7 million. During the quarter, NSR increased 13% year over year to $641 million, reflecting growth in the company’s largest and most profitable geographies driven by a strong backlog and continued pipeline growth. Adjusted operating income in the segment rose 26% year on year to $58 million. Adjusted operating margin (on an NSR basis) also increased 160 bps year over year to 9%. This marks the ninth consecutive quarter of sequential margin improvement and reflects continued progress toward achieving a double-digit margin in the International segment.
AECOM Capital contributed $0.43 million to the quarterly revenues versus $0.36 million a year ago.
Operating Highlights & Backlogs
Adjusted segment operating profit for the quarter amounted to $207 million, up 9% from the year-ago quarter’s level. The segment’s adjusted operating margin declined 30 basis points to 14.6%. Adjusted EBITDA also rose 7% year over year to $241 million.
As of September-end, the company’s total backlog came in at $40.18 billion (including 5% growth in the design business) compared with $38.58 billion reported in the prior-year quarter. The book-to-burn ratio of 1.2 reflects a 1.2 contribution from the Americas and 1.1 from the International.
Liquidity & Cash Flow
At fiscal 2022-end, AECOM’s cash and cash equivalents totaled $1.23 billion compared with $1.17 billion at the fiscal 2021 end. Total debt (excluding unamortized debt issuance cost) as of Sep 30, 2022, stood at $2.24 billion compared with $2.22 million as of Sep 30, 2021. For the full year, operating cash flow of $714 million. Free cash flow in the quarter was $257 million, down 14% from the year-ago quarter’s levels.
Fiscal 2022 Highlights
AECOM reported adjusted EPS of $3.47, up 23% year over year. Revenues of $13.15 billion slipped 1%, but NSR rose 5% year over year. Adjusted segment operating margin came in at 14.2%, up 40 bps from fiscal 2021. Adjusted EBITDA also increased 9% year over year to $900 million.
Fiscal 2023 Guidance
For next year, the company anticipates generating 8% organic NSR growth (4% for actual NSR), underpinned by robust momentum in the Professional Services business. The company expects adjusted EPS in the range of $3.55-$3.75. This indicates a 10% improvement from fiscal 2022 levels on a constant-currency basis, considering the mid-point of the guidance.
Also, it projects an adjusted operating margin of 14.6%, suggesting a 40 basis points increase on a year-over-year basis. AECOM expects adjusted EBITDA guidance in the range of $935-$975 million, indicating 10% year-over-year growth at the midpoint. The company anticipates free cash flow in the range of $475-$675 million, an average fully diluted share count of 141 million and an effective tax rate of 24-26%.
Long-Term Views
AECOM reiterated its long-term financial targets (through fiscal 2024). For the long term, it expects adjusted EPS of more than $4.75 and segment adjusted operating margin of 15%.
Also, it raised its fiscal 2024 return on invested capital target to 17% from 15% expected earlier. This reflects strong margin performance and working capital management. The company remains optimistic about surpassing its long-term guidance on the back of accelerating organic NSR growth and continued margin expansion. The benefits of its Think and Act Globally strategy and strong business execution are helping its profitability.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -9.89% due to these changes.
VGM Scores
At this time, Aecom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Aecom has a Zacks Rank #3 (Hold). We expect an in-line 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, Fluor (FLR - Free Report) , has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Fluor reported revenues of $3.61 billion in the last reported quarter, representing a year-over-year change of +16.4%. EPS of $0.07 for the same period compares with $0.23 a year ago.
Fluor is expected to post earnings of $0.51 per share for the current quarter, representing a year-over-year change of +64.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fluor. Also, the stock has a VGM Score of F.