AECOM (ACM) Tops Q3 Earnings & Revenue Estimates, Ups View
AECOM ACM reported third-quarter fiscal 2020 results, wherein earnings and revenues beat the respective Zacks Consensus Estimate. Notably, the company witnessed the seventh consecutive quarter of double-digit adjusted EBITDA growth, a near-record level of backlog and a strong balance sheet. It also raised its adjusted EBITDA guidance. Shares of AECOM gained 3.1% on Aug 4, following the earnings release.
Adjusted earnings per share of 55 cents topped the consensus mark of 46 cents by 19.6% and grew 28% year over year. Revenues of $3,189.7 million beat the Zacks Consensus Estimate of $3,265 million by 2.1% but fell 5.1% year over year.
Improved profitability reflects the company’s efforts to transform itself into a higher-margin and lower-risk Professional Services business.
AECOM Price, Consensus and EPS Surprise
AECOM reports through three segments — Americas, which consists of the company’s business in the United States, Canada and Latin America; International, which includes the businesses in Europe, the Middle East and Africa (EMEA), along with the Asia-Pacific regions; and AECOM Capital.
Americas revenues were down 4% year over year to $2,471.5 million. Nonetheless, net service revenues or NSR of $923 million for the quarter grew 2% year over year on a constant-currency organic basis, backed by double-digit growth in the Construction Management business.
Adjusted operating income of $165 million grew 25% year over year. Moreover, adjusted operating margin on an NSR basis expanded 340 basis points (bps) year over year, given solid execution, actions taken to boost margins and a strong backlog performance.
International revenues dropped 10% on a year-over-year basis to $717.9 million. On a constant-currency organic basis, NSR decreased 3% from a year ago to $590 million for the quarter. Growth in the Asia-Pacific region was offset by a decline in the EMEA region, thanks to the COVID-19 pandemic.
Adjusted operating income in the segment rose 3% year on year to $34 million. Adjusted operating margin on an NSR basis expanded 50 bps year over year. This was attributed to the benefits of real estate restructuring, a streamlined G&A structure and the ongoing exit from more than 30 countries, despite a decline in revenues.
AECOM Capital (ACAP) — which develops real estate, public private partnership and infrastructure projects — contributed $0.2 million to total revenues versus $1.4 million a year ago. The segment recorded operating loss of $0.6 million.
Adjusted operating margin for the quarter amounted to 13.2%, up 250 bps from the year-ago level. Adjusted EBITDA also increased 18% year over year to $187 million. This marks the seventh consecutive quarter of double-digit growth.
At fiscal third quarter-end, the company’s total backlog was $41.5 billion, up 16% from the prior-year figure. New order wins during the fiscal third quarter were recorded at $3.2 billion. Its total book-to-burn ratio was more than 1, on account of solid performance in design businesses
Liquidity & Cash Flow
As of Jun 30, 2020, AECOM’s cash and cash equivalents totaled $1,331.3 million, up from $1,135.1 million in the fiscal second quarter and $885.6 million at fiscal 2019-end.
As of Jun 30, 2020, total debt (excluding unamortized debt issuance cost) was $2.09 billion, down from $2.15 billion at fiscal second quarter-end and $3.35 billion at fiscal 2019-end. Of the total debt, it had $654 million of net debt and was undrawn under the $1.35-billion revolving credit facility.
AECOM is focused on the ongoing restructuring initiatives and expects to boost margins substantially, going forward. Its restructuring expenses are expected in the range of $160-$190 million. Total cash restructuring costs are projected within $185-$205 million.
Fiscal 2020 Guidance Raised
AECOM boosted its fiscal 2020 guidance. Adjusted EBITDA is now projected in the range of $720-$740 million versus $700-$740 million expected earlier. The midpoint of the guided range indicates 11% year-over-year growth. Also, it would mark the second consecutive year of double-digit adjusted EBITDA growth. The company reiterated its free cash flow projection of $100-$300 million.
AECOM — which shares space with KBR, Inc. KBR, Quanta Services, Inc. PWR and Jacobs Engineering Group Inc. J in the Zacks Engineering - R and D Services industry — currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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