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AECOM's Management Services Unit Inks U.S. Defense Deal

AECOM ACM has received a $9.87-million contract from the U.S. Army Contracting Command to provide aviation maintenance services and limited depot support. The contract will performed in Fort Campbell, KY and is expected to be completed by 2019-end.

Per the contract, the company’s Management Services or MS will provide operations and maintenance services to the U.S. Army and its reserve forces.

Contract Wins to Bolster MS Segment’s Performance

Recently, the company announced that it has won a position in the U.S. Department of State’s $6-billion Diplomatic Platform Support Services program. Per the contract, the company will provide global logistical, operation and maintenance services to different branches of the U.S. Government.

Also, itt 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.

Over the past several years, AECOM and legacy businesses have been providing cost-effective and innovative solutions worldwide to help the government achieve missions successfully.

The company has robust prospects across the board. Specifically, the MS business (contributing 19.9% to total second-quarter fiscal 2019 revenues) continues to benefit from higher-margin government works.

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.

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.

Share Price Performance

AECOM’s shares have gained 41.4%, comparing favorably with its industry’s rally of 27.3% in the year-to-date period. Estimates for the current year have been trending upward over the past 60 days, reflecting optimism over the company’s earnings growth potential. 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 & Key Picks

Currently, AECOM carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include KBR, Inc. KBR, Jacobs Engineering Group Inc. JEC and Quanta Services, Inc. PWR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KBR surpassed earnings estimates in all the trailing four quarters, with the average being 8.9%.

Jacobs has a three-five year expected EPS growth rate of 12%.

Quanta Services’ earnings for the current year are expected to increase 29.5%.

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