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AECOM Wins a Position in DoS' DiPSS Program, Boosts MS Unit

AECOM ACM has won a position in the U.S. Department of State’s (DoS) $6-billion Diplomatic Platform Support Services (DiPSS) program. Per the contract, the company will provide global logistical, and operation and maintenance services to different branches of the U.S. Government.

This Multiple Award, Indefinite Delivery Indefinite Quantity (IDIQ) contract is designed to address the need for a full range of services for Program Management, Procurement of Critical Items, Life Support Services, Logistics Services, Operation and Maintenance Services, and Construction and Renovation Projects for facilities across the world, with a focus on high-threat contingency environments.

Precisely, AECOM is among the 11 awardees on the five-year DiPSS IDIQ contracts.

Over the past 100 years, the company and its legacy businesses have been providing cost-effective and innovative solutions worldwide to help the government achieve missions successfully. The company is witnessing robust prospects in all the segments. Particularly, the Management Services or MS business (contributing 19.9% to total revenues in the second quarter of fiscal 2019) continues to benefit from higher-margin government works.

Since the beginning of fiscal 2017, the segment’s backlog increased nearly 127% from the comparable year-ago period. It exited the first half of fiscal 2019 with more than $3 billion of wins and continues to proceed with more than $30 billion pipeline of pursuits.

Notably, the segment’s revenues increased 13.6% in the fiscal second quarter, backed by 14% organic revenue growth and significant contract wins. The company sees several years of visibility in backlog, given compelling DoD prospects and high-margin DOE opportunities.

AECOM’s Recent Contract Win Fortifies MS Business

Recently, AECOM announced that it has signed an Alliance Agreement with Toshiba to work together on decommissioning nuclear reactors in Japan. The alliance will provide comprehensive services and commercial power utilities to the Japanese government for decommissioning their reactors and nuclear facilities.

Share Price Performance

AECOM’s shares have gained 39.1%, comparing favorably with its industry’s rally of 23.7% in the year-to-date period. Estimates for current year have been trending upward over the past 60 days, reflecting optimism over the company’s earnings growth potential. The company's endeavors to improve profitability and de-risk its business profile by focusing more on the fastest-growing markets having more competitive advantages are expected to drive growth.

Zacks Rank & Other Key Picks

Currently, AECOM carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same space include Altair Engineering Inc. ALTR, KBR, Inc. KBR and Quanta Services, Inc. PWR, each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Altair Engineering, KBR and Quanta Services’ earnings for the current year are expected to grow 53.7%, 8.5%, and 29.5%, respectively.

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