AECOM ACM reported impressive results for fourth-quarter fiscal 2024, where earnings surpassed the Zacks Consensus Estimate and grew on a year-over-year basis. Revenues also increased from the prior year, backed by solid organic net service revenues (NSR) growth in its design business.
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Shares of this global infrastructure leader lost 1.2% in the after-hours trading session on Monday despite being exceeding its previously-increased guidance for all major metrics.
Apart from this, ACM announced an 18% increase in its quarterly dividend payout to 26 cents, payable on Jan. 17, 2025, to stockholders of record on Jan. 2. Also, it increased its share repurchase authorization to $1 billion. Impressively, AECOM has grown per share dividend at a 20% CAGR since inception.
Delving Deeper
The company reported adjusted earnings per share (EPS) of $1.27, which topped the consensus mark of $1.22 by 4.1% and increased 25.7% from $1.01 reported in the prior-year quarter. The strong improvement was backed by benefits received from high-returning organic growth initiatives.
Revenues of $4.11 billion rose 7% on a year-over-year basis. Adjusted NSR moved up 5% to $1.81 billion.
Segment Details
Americas’ revenues came in at $3.16 billion during the reported quarter, up 8% from the prior-year quarter’s levels. NSR of $1.06 billion moved up 6% year over year, backed by 8% growth in the design business, partially offset by impacts from Hurricane Helene in September.
Adjusted operating income of $207.7 million was up 9% year over year. Adjusted operating margin (on an NSR basis) expanded 70 basis points (bps) year over year to 19.6%, indicating the underlying strength of the business, positive impacts of growth and ongoing reinvestment in long-term organic growth initiatives, as well as strong execution and growth.
The total backlog at the fiscal 2024-end was $17.4 billion compared with $16.9 billion a year ago.
International revenues were up 5% year over year to $948.4 million. During the quarter, NSR increased 4% year over year to $754.1 million.
Adjusted operating income in the segment rose 31% year over year to $94.9 million. Adjusted operating margin (on an NSR basis) also moved up 260 bps year over year to 12.6%. This was backed by continued strong execution and the benefits of actions to narrow its focus on high-returning opportunities across its largest geographies.
The total backlog at the end of fiscal 2024 was $6.43 billion compared with $6.27 billion a year ago.
AECOM Capital's quarterly revenues were $0.5 million.
Operating Highlights
Adjusted segment operating profit amounted to $261 million, up 16% from the year-ago quarter. The segment’s adjusted operating margin (NSR) improved 150 bps to 16.7%. The upside was driven by high-returning organic growth.
Adjusted EBITDA rose 15% year over year to $290 million. Adjusted EBITDA margin of 16.7% also rose 140 bps year over year, backed by its ongoing investments in high-margin organic growth and its continuous improvement initiatives.
Backlogs
As of the fiscal 2024-end, the total backlog came in at $23.86 billion compared with $23.16 billion reported in the prior-year period. The current backlog level includes 50.8% contracted backlog growth.
A 5% increase in the design business backlog was driven by a 50%-win rate, an all-time high, and continued strong end-market trends.
ACM’s pipeline of opportunities increased 10%, which was a new high, driven by robust funding across all its largest markets.
ACM’s Fiscal 2024 Highlights
For the full year, the company reported revenues of $16.1 billion, which increased 12% from the previous year. NSR reached an all-time high in fiscal 2024 and included strength across the largest end markets and geographies. ACM delivered 8% growth in the design business in fiscal 2024, driven by 9% growth in the Americas.
Adjusted EPS also increased 22% to $4.52 from fiscal 2023. Adjusted EBITDA margins of 16% also rose 100 bps year over year. The segment adjusted operating margin was 15.8%, which exceeded the guidance of 15.6% and grew 100 bps year over year.
Liquidity & Cash Flow
At the fiscal 2024-end, AECOM’s cash and cash equivalents totaled $1.58 billion compared with $1.26 billion at the fiscal 2023-end. The total debt (excluding unamortized debt issuance costs) as of Sept. 30, 2024, was $2.54 billion, up from $2.22 billion in the fiscal 2023-end.
In fiscal 2024, adjusted operating cash flow increased 19% year over year to $827 million. Adjusted free cash flow also increased 20% to $708 million year over year.
Fiscal 2025 Guidance
The company anticipates to generate 5-8% organic NSR growth in fiscal 2025. It expects adjusted EPS in the range of $5.00-$5.20. This indicates a 13% improvement from fiscal 2024 levels on a constant-currency basis, considering the mid-point of the guidance.
AECOM expects adjusted EBITDA in the range of $1.17-$1.21 billion, indicating 9% year-over-year growth at the midpoint. Adjusted EBITDA margin is expected to be 16.3%, representing a 30 bps increase from fiscal 2024.
The company anticipates more than 100% adjusted net income to free cash flow conversion, an average fully diluted share count of 134 million and an effective tax rate of 24%.
Long-Term Views
ACM expects to deliver 5-8% organic NSR growth, at least 20-30 bps adjusted EBITDA margin expansion, double-digit adjusted EPS and free cash flow per share improvement annually. It also expects to achieve at least 17% adjusted EBITDA margin (exiting fiscal 2026) and at least 25% return on invested capital over the long term. ACM anticipates approximately 100% conversion of adjusted net income to free cash flow.
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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