ACM - Embedded Expectations Analysis - 2021 08 09
AECOM (ACM:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 19.4x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about federal infrastructure spending, their operating margins, and meeting their EPS guidance.Specifically, management may have concerns about the sustainability of industrial market optimism, the potential for proposed federal infrastructure spending to activate the built-up backlog of projects, and their portfolio's alignment with client interests. Additionally, they may lack confidence in their ability to capitalize on opportunities stemming from the distribution of federal funds through the American Rescue Plan, improve their capture rates and gain market share, and outgrow the industry. In addition, they may lack confidence in their ability to meet their 2024 EPS goals, maintain operating margins improvements, and manage their interest expense.
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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