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AECOM (ACM) Q2 Earnings Surpass Estimates, Revenues Up Y/Y


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AECOM ACM reported second-quarter fiscal 2018 adjusted earnings per share of 67 cents, beating the Zacks Consensus Estimate of 65 cents.

However, the bottom line declined 24.7% from the year-ago tally of 89 cents.

Revenues in Detail

In the quarter under review, revenues increased 8.2% to $4,791 million on a year-over-year basis. Also, the top-line figure came ahead of the Zacks Consensus Estimate of $4,785 million.

Moreover, AECOM achieved 5% organic growth in the quarter, which marked the sixth successive quarter of positive organic growth. Strength in the company's transportation and water markets as well as continued strong performance of its Building Construction business drove the top line.

Segment-wise, Design & Consulting Services (DCS) revenues rose 7.3% year over year to $2,004.7 million. On a constant-currency basis, organic revenues increased 5% backed by strong performance at the company's transportation and water markets in the Americas. This impressive performance can be attributed to improved funding and a strong backlog position.

Construction Services (CS) revenues were up 9% to $1,888.3 million on a year-over-year basis. On a constant-currency basis, organic revenues rose 4%. Solid performance of this segment was driven by Building Construction businesses.

Management Services (MS) revenues registered a year-over-year increase of 8.6% to $897.8 million. On an organic basis, the metric grew 9%, reflecting stellar performance across its portfolio of projects.

AECOM Price, Consensus and EPS Surprise

AECOM Price, Consensus and EPS Surprise | AECOM Quote

However, AECOM's adjusted operating income in the quarter under review amounted to $179 million, down from the year-ago tally of $188.5 million. New order wins in the quarter totaled $6.9 billion. The company's total book-to-burn ratio was 1.4%, with significant contribution from all its three segments.

At the end of the fiscal second quarter, AECOM's total backlog was at an all-time high of $50 billion, up 18%, reflecting a favorable mix shift to the higher-margin DCS and MS segments. This included a solid backlog position in the DCS segment and the MS segment.

Liquidity & Cash Flow

As of Mar 31, 2018, AECOM's cash and cash equivalents summed $867.2 million compared with $802.4 million as of Sep 30, 2017.

As of Mar 31, 2018, total debt (excluding unamortized debt issuance cost) came in at $3,999.1 million compared with $4,261.5 million on Mar 31, 2017. AECOM generated free cash flow of $94.7 million in the reported quarter.

2018 Guidance

AECOM reiterated its fiscal 2018 guidance. The company continues to expect adjusted earnings per share to be in the range of $2.50-$2.90.

In terms of spending, the company continues to expect interest expenses (excluding amortization of deferred financing fees) of $210 million and capital expenditures of $110 million for 2018.

Our Take

Increase in the proportion of higher margin work is benefiting AECOM's Construction Services segment and Management Services segment. Moreover, the Shimmick buyout is supplementing core revenue growth. Going ahead, the company remains confident that favorable political climate will continue to unlock growth opportunities in infrastructure and defense markets.

Moreover, the Zacks Rank #2 (Buy) company's solid backlog levels, which are key indicators of future revenue growth, reflect significant opportunities in the forthcoming quarters. This apart, transportation investment remains healthy and the company is delivering several large projects. Overall, it can be said that the global consensus toward the need for substantial infrastructure investments might boost the company's performance.

Other Stocks to Consider

Some other stocks worth considering from the same space include Dycom Industries, Inc. DY , Jacobs Engineering Group Inc. JEC and KBR, Inc. KBR . All these companies carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Dycom Industries has an excellent earnings surprise history. The company surpassed estimates in the trailing four quarters, with an average beat of 7.1%.

Jacobs Engineering Group has an impressive earnings surprise history. The company exceeded estimates in the trailing four quarters, with an average beat of 11.4%.

KBR has a decent earnings surprise history. The company outpaced estimates thrice in the trailing four quarters, with an average beat of 14.1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: JEC , DY , ACM , KBR



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