AECOM ACM recently announced that its subsidiary, AECOM Asia Company Limited, has clinched a program management contract from China-based Elite Global Group Limited ("EGGL"). The contract requires the company to provide comprehensive and integrated program management services. The contract was clinched in the IAAPA Attractions Expo 2017, in Orlando, FL.
Per the contract, AECOM will offer large capital project program management services to EGGL. AECOM’s industry-leading project management services will facilitate the development of EGGL’s 250-acre Nickelodeon-themed project worth $1.85 billion, a central feature for Foshan Cultural and Ecological Coastal Park. Notably, the Foshan Cultural and Ecological Coastal Park encompasses cultural, tourism, sports as well as science & technology components.
Our Take
AECOM’s diversified portfolio comprises both designing and construction services. Additionally, the company’s business is spread across a number of key markets that mitigates operating risks. The company is efficient in dealing with cyclical market volatility which helps it capitalize on the upside of its business during downturns. More than 70% of AECOM’s profits are generated from infrastructure and defense markets that are poised to benefit from the favorable political climate both in the United States and abroad.
AECOM is witnessing robust prospects across all its segments. The Construction Services and Management Services segments continue to benefit from higher margin work in the building construction and power businesses.
Further, the company’s solid backlog levels, which are a key indicator of future revenue growth, exhibit significant opportunities in the forthcoming quarters.
Despite the positives, the stock has had an unimpressive run on the bourse in the last six months. The Zacks Rank #3 (Hold) company has returned 12.3%, underperforming the industry’s growth of 15.5%.
Moreover, cyclical demand of the company’s services and currency fluctuations are likely to thwart growth, going forward. This apart, AECOM is facing certain challenges in few of its end markets that might weigh on its near-term financial performance. The company believes that economic conditions in many of its end-markets, including Canada, China and the Middle East, have weakened over time and may remain difficult in the near future, which might prove to be a drag on revenues.
Stocks to Consider
Some better-ranked stocks from the same space include Owens Corning Inc OC, Boise Cascade, L.L.C. BCC and Rayonier Inc. RYN. While Owens Corning and Boise Cascade sport a Zacks Rank #1 (Strong Buy), Rayonier carries a Zacks Rank #2 (Buy). You can see