AECOM Technology Corporation’s (ACM) first quarter fiscal 2015 adjusted earnings came in at 71 cents per share, which exceeded the Zacks Consensus Estimate of 58 cents by 22.4% and the prior-year quarter figure of 61 cents by 16.4%.
Earnings benefited from the company’s significant contract wins, improved operating performance and ongoing successful integration of URS Corp. that was acquired in Oct 2014.
Inside the Headlines
For first-quarter fiscal 2015, AECOM reported revenues of $4,186 million, a significant rise of 114.2% on a year-over-year basis. However, the reported figure missed the Zacks Consensus Estimate of $4,905 million. Quarterly rise in revenues was driven by robust growth across all the segments of the company.
As per the segments, Design & Consulting Services (‘DCS’) revenues jumped 44.2% year over year to $1,877 million. However, on an organic basis, revenues dipped 2%.
Construction Services (‘CS’) revenues increased more than two fold to $1,530 million, with a 25% year-over-year rise on organic basis.
Also, Management Services (‘MS’) segment registered an over 200% increase in revenues to around $779 million, on a year-over-year basis. However, on an organic basis, revenues dipped 8%.
New orders in the quarter aggregated $4.6 billion, aided by growth in AECOM’s building construction business and across Americas and Asia-Pacific. Total backlog stood at $40.7 billion – a massive increase of more than 200% on a year-over-year basis.
However, AECOM’s operating income decreased 83% year over year to $15 million in the quarter.
Liquidity and Cash Flow
AECOM ended the quarter with cash and cash equivalents of $734.6 million, up from $574.2 million as of Sep 30, 2014. Long-term debt came in at $4,775 million, as compared to $939.6 million at the end of fourth quarter fiscal 2014. On the other hand, stockholder’s equity of $3,550 million was up from $2,187 million as of Sep 30, 2014.
Cash flow from operating activities was $282.6 million in the quarter, up from $137.4 million in the year-ago quarter. Free cash flow for the quarter came in at $252.9 million, as compared to $116.6 million in the comparable period.
2015 Guidance Reiterated
AECOM reaffirmed its guidance for fiscal 2015 in the range of $2.75–$3.35 per share. The mid point of the guidance includes a benefit of about $110 million from synergies generated through the URS acquisition.
Our Take
After posting weak results in the earlier quarter, AECOM bounced back on the growth track with impressive quarterly results. In particular, the URS acquisition has made AECOM one of the major companies, in terms of revenues, in the engineering and construction industry. With the successful integration of the acquired firm, AECOM plans to accelerate its strategy of offering an integrated-delivery model, by adding key capabilities and expertise in vital markets. Going forward, URS’ knowledge in sectors like construction, oil & gas, power and government services will likely be a significant growth driver for AECOM.
AECOM currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Willdan Group, Inc. (WLDN), Pernix Group Inc (PRXG) and AO Smith Corp. (AOS). While Willdan Group sports a Zacks Rank #1 (Strong Buy), both Pernix Group and AO Smith holds a Zacks Rank #2 (Buy).
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