We recently initiated our coverage on
AECOM Technology Corporation
), a professional, technical and management support services
provider, with an Underperform recommendation.
AECOM specializes in providing integrated services for
planning, construction and maintenance of infrastructures that
include consulting, architecture, engineering as well as managing
the requirements for energy, water and environment.
The company is experiencing slower-than-expected growth on
both the top- and bottom-lines. Though AECOM is gaining from the
ongoing recovery in the U.S. non-residential construction market,
sluggish federal demand remains a challenge.
Furthermore, declining demand from Australia was a drag for
the company's revenues in 2013, and the situation is likely to
continue in 2014. The company continued to benefit from its
Professional technical services segment, but the weak performance
of the Management Support Services segment continues to be a
matter of concern.
The company's business in Australia has been sluggish
primarily due to the weakness in the mining sector. Also, the
projects included in the company's backlog are usually long-cycle
projects, which run the risks of getting delayed or cancelled;
thereby impacting AECOM's operations and cash flows.
AECOM has been planning to reposition its MSS (Management
Support Services) business to make it more profitable. The
company plans to shift from higher-volume lower-margin
international work to lower-volume higher-margin work in the U.S.
The resultant decrease in volume is likely to impact the
company's revenues and earnings until the desired margin levels
Other Stocks to Consider
AECOM currently has a Zacks Rank #4 (Sell). Other stocks worth
AO Smith Corp.
) with a Zacks Rank #1 (Strong Buy) and
Plug Power Inc.
), both carrying a Zacks Rank #2 (Buy).
AECOM TECH CORP (ACM): Free Stock Analysis
SMITH (AO) CORP (AOS): Free Stock Analysis
ENERSYS INC (ENS): Free Stock Analysis Report
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