Morningstar | AECOM Beats Consensus Expectations but Our Long-Term Outlook Remains Unchanged; Maintaining FVE. See Updated Analyst Note from 05 Feb 2019
We maintain our $37 fair value estimate for Aecom after the no-moat engineering and construction firm posted a strong quarter. The company’s fiscal 2019 first-quarter revenue of $5.04 billion came in $20 million above consensus estimates, while GAAP EPS of $0.32 and adjusted EPS of $0.56 each beat expectations by a nickel.Aecom delivered a 5% year-over-year organic sales increase, fueled by 12% growth in its Americas design business and 17% growth in its management services segment. The latter benefited from strong U.S. Department of Defense and Department of Energy funding. Aecom’s backlog remains strong, currently standing at an all-time high of $59.5 billion after a 22% year-over-year increase.
Furthermore, management announced that its $225 million G&A cost reduction plan is ahead of schedule and now expects to realize $85 million of savings in fiscal 2019. Management continues to take steps to simplify the firm’s operating structure, having already completed roughly 25% of its planned 30 country exits in order to focus on fastest-growing markets.
Our thesis for Aecom remains intact as the company continues to deliver solid results. We are encouraged that management is focusing on growing the firm’s more profitable design & consulting services and management services segments as well as implementing initiatives to improve future profitability.
AECOM designs, builds, finances and operates infrastructure assets for governments, businesses and organizations. The company provides: planning, consulting, architectural and engineering design services to commercial and government clients in transportation, facilities, environmental, energy, water and government markets; construction services, including building construction and energy, infrastructure and industrial construction; as well as program and facilities management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, for agencies of the United States government and for other national governments.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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