AECOM (ACM) Wins Twin Contracts, Boosts Revenue Stream - Analyst Blog

Global professional and technical services provider AECOMACM recently won a contract from Department for Communities and Local Government ("DCLG"). The contract entails the company to act as the subcontractor, providing planning and environmental services for communities across England. Locality - DCLG's countrywide community organizations network, will collaborate with AECOM in this project to aid the formation of neighborhood plans necessary for local area growth and development.

The Neighborhood Development Project

The contract, which is the first of its kind in the U.K., gives AECOM the responsibility to select best locations for new housing and business complexes that will optimize the community needs. The deal has an exclusive "scoping phase", under which AECOM will help community groups to identify their needs and opportunities in order to maximize their well being.

DCLG's decision to select AECOM as the principle subcontractor for the community development project is sensible, as the latter has been investing in this sector over the last 3 years and has already supported more than 80 neighborhood development plans across England. The company's profound technical and managerial expertise in areas like planning, environment, landscape and transport makes it an ideal fit for assessment of local needs in a particular area as well as rendering sustainable solutions. AECOM's data will give DCLG and Locality a clear idea about community needs that can then be met accordingly.

Locality, assisting locals to shape their neighborhood, has already settled 10% of the population in the designated neighborhoods. The recent contract is part of DCLG's 2013 £9.5-million Neighborhood Planning program initiative that is currently being handled by Locality, the Royal Town Planning Institute's Planning Aid England (RTPI PAE) and AECOM.

Grassroots Automotive Plant Project

At the same time, AECOM won a project from BMW Group to help the latter develop its latest grassroots production plant in San Luis Potosí, Mexico. According to the contract, AECOM will prepare a master plan for the new plant and also help in related project-management activities like designing, construction and basic start-up services.

Winning the contract definitely marks a major accomplishment for AECOM, considering this is BMW Group's first business venture in the emerging Mexican market and its second North American production plant. AECOM will mainly provide project and construction management services to BMW Group's $1-billion investment project, which aims to develop a 370,000-square meter facility for building 150,000 vehicles per year.

Our Take

We believe that AECOM's contract winning spree will likely continue in the future as well, generating incremental revenues going forward. Since the concept of neighborhood planning has gained momentum over the past couple of years and is now considered as one of the most powerful tools for drafting planning applications, it is a prudent strategy for AECOM to venture into this field.

The latest deal also marks another major government contract win for the company after Crossrail 2, London's major rail infrastructure project (read more: AECOM to Boost London Transport with Crossrail 2 Project). In addition, winning the contract for BMW Group's first Mexican venture is likely to attract similar awards in the future, adding to the company's profitability.

Zacks Rank

AECOM currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the sector include Dycom Industries Inc. DY and Willdan Group, Inc. WLDN and Pernix Group Inc PRXG . While both Dycom Industries and Willdan Group sport a Zacks Rank #1 (Strong Buy), Pernix Group carries a Zacks Rank #2 (Buy).

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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.

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

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