Yahoo Finance AECOM (ACM) Q2 Earnings & Revenues Beat, NSR Increases Y/Y
AECOM ACM reported impressive results in second-quarter fiscal 2023, where earnings and revenues surpassed the Zacks Consensus Estimate. On a year-over-year basis, the top and bottom lines increased, backed by strong organic net service revenues (NSR) growth.
Post-results, shares of the technical and management support services provider jumped 1.58% on May 8.
Lara Poloni, AECOM’s president, said, “With unprecedented levels of funding from the three secular megatrends – including continued investments in global infrastructure, sustainability and resilience and long-term supply chain and energy transitions – combined with our continued market share gains and expanding addressable market, we are highly confident in our ability to capitalize and outperform.”
Inside the Headline
The company reported adjusted earnings of 92 cents per share, which topped the consensus mark of 88 cents by 4.6% and increased 11% from 83 cents reported in the prior-year quarter.
AECOM Price, Consensus and EPS Surprise
AECOM price-consensus-eps-surprise-chart | AECOM Quote
Revenues of $3.49 billion beat the consensus mark of $3.31 billion by 5.4% and rose 9% on a year-over-year basis. NSR moved up 7% to $1.68 billion. The design business recorded year-over-year NSR growth of 8%, driven by accelerating growth across all major markets.
Segment Details
During the reported quarter, Americas’ revenues came in at $2.63 billion, up 10% from the prior-year quarter’s levels. NSR of $976 million moved up 3% year over year, backed by 5% growth in the design business.
Adjusted operating income of $182 million was up 9% year over year. Adjusted operating margin (on an NSR basis) also expanded by 100 basis points (bps) year over year to 18.7%. The total backlog at fiscal second-quarter end was $35.89 billion versus $35.25 billion a year ago.
International revenues were up 6% year over year to $860 million. During the quarter, NSR increased 12% year over year to $703 million, reflecting growth in the largest and most profitable markets.
Adjusted operating income in the segment rose 9% year over year to $60 million. Adjusted operating margin (on an NSR basis) also increased 30 bps year over year to 8.6%. This reflects continued progress toward achieving a double-digit margin in the International segment. The total backlog at the end of the fiscal reported quarter was $6.09 billion versus $5.55 billion from a year ago.
AECOM Capital contributed $0.18 million to the quarterly revenues versus $0.45 million a year ago.
Operating Highlights & Backlogs
Adjusted segment operating profit amounted to $212 million, up 12% from the year-ago quarter’s level. The segment’s adjusted operating margin (NSR) improved by 60 basis points to 14.5%. The upside reflects ongoing operational initiatives and a focused allocation of time and capital on high-return opportunities. Adjusted EBITDA also rose 10% year over year to $244 million (14% on a constant-currency basis), backed by strong underlying operational growth.
As of the fiscal second quarter end, total backlog came in at $41.98 billion compared with $40.8 billion reported in the prior-year period. The current backlog level includes 54.5% contracted backlog growth. A record-high 12% growth in the design business backlog (on a constant currency basis) reflects solid quarterly wins and 1.5x book-to-burn.
Liquidity & Cash Flow
At the fiscal second quarter’s end, AECOM’s cash and cash equivalents totaled $1.07 billion compared with $1.16 billion at the fiscal 2022 end. The total debt (excluding unamortized debt issuance costs) as of Mar 31, 2023, stood at $2.19 billion compared with $2.23 million as of Dec 31, 2022.
For the first six months of fiscal 2023, operating cash flow was $131.5 million, down from $193.2 million reported in the prior year. Adjusted free cash flow was $63 million, down from the year-ago quarter’s level of $145.3 million.
Fiscal 2023 Guidance Reiterated
ACM anticipates generating 8% organic NSR growth (4% for actual NSR), underpinned by robust momentum in the Professional Services business.
The company expects adjusted EPS in the range of $3.55-$3.75. This indicates a 10% improvement from fiscal 2022 levels on a constant-currency basis, considering the mid-point of the guidance.
Also, it projects an adjusted operating margin of 14.6%, suggesting an increase of 40 bps on a year-over-year basis. On a constant-currency basis, AECOM expects adjusted EBITDA in the range of $935-$975 million, indicating 10% year-over-year growth at the midpoint.
The company anticipates free cash flow in the range of $475-$675 million, an average fully diluted share count of 141 million and an effective tax rate of 24-26%.
Long-Term Views
For fiscal 2024, AECOM expects to generate adjusted EPS of more than $4.75, a segment-adjusted operating margin of 15% and a return on invested capital of 17%.
Also, it maintains its long-term expectations for a segment-adjusted operating margin of 17%. This reflects strong margin performance and working capital management. The company remains optimistic about surpassing its long-term guidance on the back of accelerating organic NSR growth and continued margin expansion. The benefits of its “Think and Act Globally” strategy and strong business execution are helping its profitability.
Zacks Rank & Peer Releases
AECOM 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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