On August 5, 2024, AECOM (ACM, Financial) released its 8-K filing for the third quarter of fiscal 2024. AECOM, a leading global provider of design, engineering, construction, and management services, reported significant growth in revenue and earnings, surpassing analyst estimates.
Company Overview
AECOM is one of the largest global providers of design, engineering, construction, and management services. It serves a broad spectrum of end markets including infrastructure, water, transportation, and energy. Based in Los Angeles, AECOM has a presence in over 150 countries and employs 51,000. The company generated $14.4 billion in sales and $847 million in adjusted operating income in fiscal 2023.
Performance Highlights
For the third quarter of fiscal 2024, AECOM reported:
| Metric | Reported | YoY % Change |
|---|---|---|
| Revenue | $4,151 million | 13% |
| Net Income | $129 million | NM |
| EPS (Fully Diluted) | $0.95 | NM |
| Adjusted EPS | $1.16 | 23% |
The reported revenue of $4.151 billion exceeded the analyst estimate of $4.019 billion, while the adjusted EPS of $1.16 fell short of the estimated $1.17. This performance underscores AECOM's robust growth trajectory and effective execution of its strategic initiatives.
Financial Achievements
AECOM's financial achievements for the quarter include:
- Operating income increased to $227 million, with an adjusted operating income of $261 million, reflecting a 19% YoY increase.
- Net service revenue (NSR) reached a record high of $1.826 billion, driven by growth across all major end markets.
- Adjusted EBITDA margin increased by 130 basis points to 16.5%, setting a quarterly record.
- Total backlog remains near an all-time high at $23.362 billion, indicating strong future revenue potential.
Segment Performance
In the Americas, revenue was $3.2 billion with an 8% increase in NSR to $1.1 billion. Operating income rose by 11% to $207 million, and the adjusted operating margin on NSR increased by 50 basis points to 19.3%.
Internationally, revenue was $904 million with a 7% increase in NSR to $729 million. Operating income and adjusted operating income both increased by 25% to $85 million, with the adjusted operating margin on NSR rising by 180 basis points to 11.7%.
Balance Sheet and Cash Flow
As of June 30, 2024, AECOM reported $1.6 billion in total cash and cash equivalents, $2.5 billion in total debt, and $897 million in net debt. The company achieved a net leverage ratio of 0.8x, indicating strong financial health.
Operating cash flow for the quarter was $291 million, with free cash flow of $273 million, reflecting a 3% YoY increase.
Commentary
“Our third quarter performance was highlighted by record revenue and margins, strong cash flow growth, and we increased our earnings guidance for a second time this year, which reflects our competitive advantages,” said Troy Rudd, AECOM’s chief executive officer.
“With record levels of investment across nearly every market in which we operate, clients are turning to AECOM now more than ever to help deliver the largest and most complex projects and programs in the world,” said Lara Poloni, AECOM’s president.
“Through our consistent execution, double-digit earnings growth and strong cash flow, we are delivering on the key elements of shareholder value creation,” said Gaurav Kapoor, AECOM’s chief financial and operations officer.
Analysis
AECOM's strong third-quarter performance and increased earnings guidance highlight the company's robust market position and effective strategic execution. The significant growth in revenue and earnings, coupled with a record backlog, positions AECOM well for sustained future growth. The company's focus on high-returning end markets and investments in digital initiatives and leadership development are driving improved profitability and operational efficiency.
Value investors may find AECOM's consistent performance and strategic initiatives appealing, as the company continues to capitalize on opportunities in the global infrastructure, sustainability, and energy transition markets.
Explore the complete 8-K earnings release (here) from AECOM for further details.
