AECOM (ACM) To Report Q4 Earnings: What's In The Cards?

AECOM (NYSE:ACM) is scheduled to report fourth-quarter fiscal 2018 results on Nov 12, before the opening bell. In the last reported quarter, earnings of the company, which shares space with Fluor Corporation (NYSE:FLR) , Jacobs Engineering Group Inc. (NYSE:JEC) and MasTec, Inc. (NYSE:MTZ) in the Zacks Engineering - R and D Services industry, came in at 62 cents per share, beating the Zacks Consensus Estimate by 1.6%.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. For the quarter to be reported, the Zacks Consensus Estimate is currently pegged at 81 cents, trending downward over the past 30 days. Nevertheless, this reflects an increase of 9.5% from the year-ago earnings of 74 cents per share. Revenues are expected to be $5.26 million, up 8.4% year over year.

AECOM Price and EPS Surprise

AECOM Price and EPS Surprise | AECOM Quote

Factors at Play

AECOM has been benefiting from ongoing momentum across end markets and continued progress on its long-term financial and strategic objectives. All the three segments of the company recorded growth through the nine months of fiscal 2018, with strong growth in building construction and steady improvement in Americas design business. We expect the trend to continue in the fiscal fourth quarter as well.

At the end of the fiscal third quarter, the company recorded a backlog of $54 billion, reflecting a 16% year-over-year increase. Its solid backlog levels, which are a key indicator of future revenue growth, indicate significant opportunities in the forthcoming quarters. During the fiscal third quarter, the company secured wins worth $9.4 billion and recorded a book-to-burn ratio of 1.7%, with significant contribution from all the three segments. Meanwhile, its organic revenue growth of 5% in the third quarter marks the sixth consecutive quarter of positive organic growth, led by higher-margin Design & Consulting Services (“DCS”) and Management Services (“MS”) segments.

The Zacks Consensus Estimate for DCS revenues (comprising 40.9% of the total revenues) of $2,200 million reflects an increase from $1,995 million in the year-ago quarter and $2,105 million in the second quarter.

The consensus estimate for fiscal fourth-quarter revenues for the Construction Services (“CS”) segment (accounting for 40.9% of its total revenues) is pegged at $1,979 million, reflecting growth from $1,971 million in the year-ago period but a decline from $2,107 million in the last reported quarter.

The consensus estimate for fiscal fourth-quarter revenues for the MS segment is pegged at $975 million, reflecting growth from $890 million in the year-ago period and $936 million in the last reported quarter.

Meanwhile, it is important to note that AECOM has been undertaking strategic decisions to position the business in the best possible way for attaining long-term success. The company aimed not to pursue fixed price EPC projects in the combined-cycle gas market. To that end, it has already removed $650 million from backlog in the last reported quarter related to two combined-cycle gas plant projects. Secondly, it has plans to sell and exit certain non-core Oil & Gas operations, which are not aligned with AECOM's broader growth objectives. The company expects to incur higher restructuring cost in the second half of the year, in a bid to sell and exit the non-core Oil & Gas operations.

Quantitative Model Prediction

Our proven model conclusively shows that AECOM is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +3.45%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AECOM currently carries a Zacks Rank #3.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can see the complete list of today’s Zacks #1 Rank stocks here.

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