Aecom Earnings: We Expect Record Backlog To Drive Revenue Growth Acceleration

Aecom ACM delivered solid fiscal second-quarter results, featuring an 11% year-over-year increase in adjusted EPS, from $0.83 to $0.92. We’ve increased our fair value estimate to $84 from $82, which reflects our slightly more optimistic revenue growth projections as well as time value of money.

Aecom grew its fiscal second-quarter professional services organic net service revenue, or NSR, by 7% from the same period last year, driven by 3% NSR growth in the Americas and 12% NSR growth in the international segment. We were pleased to see Aecom post a 60-basis-point year-over-year segment adjusted operating margin expansion to 14.5%. Management reaffirmed its guidance for full-year fiscal 2023 and continues to expect organic NSR growth of around 8%, adjusted EPS of $3.55-$3.75, and adjusted EBITDA of $935 million-$975 million. The guidance range excludes contribution from Aecom Capital and assumes no further share repurchases, so we see potential upside to the numbers as we believe that Aecom’s strong balance sheet and cash flows will give management flexibility to continue repurchasing stock.

Looking beyond fiscal 2023, we remain optimistic about the long-term outlook for Aecom. The company grew its design backlog to $21 billion, a 12% year-over-year increase. Furthermore, proposals and submitted bids were up by over 30% from the prior-year period. We believe that Aecom’s portfolio is well aligned with favorable secular trends, including investments in infrastructure, clean energy solutions, and supply chains. We expect NSR growth to accelerate as we believe the firm is well positioned to benefit from increased infrastructure spending in the U.S. due to the Infrastructure Investment and Jobs Act. Aecom reaffirmed its fiscal 2024 targets, which include reaching a 15% segment adjusted operating margin and adjusted EPS of over $4.75.