Dive Brief:
- AECOM, the country’s 10th largest contractor, reported increased profits of $107 million Monday, or 75 cents per diluted share, but its $3.2 billion in revenue was 5% lower than a year ago.
- The Dallas-based firm’s backlog increased to $41.1 billion, up 3.5% from the $39.7 billion it posted 12 months previously.
- AECOM raised the midpoint of its fiscal guidance for earnings per share to between $3.35 and $3.50, an increase of 5 cents per share from the previous quarter.
Dive Insight:
Adjusted earnings per share, which excluded certain charges for the quarter, came in at 86 cents per share, besting Wall Street analysts’ expectations of 82 cents, according to stock analysis site Seeking Alpha. But total revenue missed analysts’ expectations by $250 million, Seeking Alpha said.
AECOM CEO Troy Rudd characterized a 10% increase in the firm’s design business backlog, which comes at the front end of the construction process, as evidence the firm can capitalize further on increased infrastructure funding, according to a press release.
“The three long-term mega-trends of a global infrastructure renaissance, ESG investments and client investments to adapt to a post-pandemic world are fully intact, which underpins our confidence in the future,” Rudd said.
A 'solid beat'
Andrew Wittmann, senior research analyst at Milwaukee-based financial services firm Baird, characterized the results as a "solid beat" and likewise noted the contribution of more business in the firm's design segment.
He said its construction management backlog was essentially flat due to foreign currency exchange rates, but pointed to an improvement in the core, high-margin section of the company's design business.
During a conference call with Wall Street analysts, Rudd emphasized that the firm's results thus far didn't reflect any material impact from the $1.2 trillion Infrastructure Investment and Jobs Act, but that its public entity clients were starting to see those funds.
"There's been $114 billion in IIJA funding announced as available, and notices of funding opportunities are accelerating," Rudd said. He said opportunities in the firm's pipeline had increased 40% as a result, and he expects to see meaningful impacts from the money in 2023.
Recession resistant
While economists have pointed to the possibility of recession ahead, Rudd said infrastructure investment in the U.S. and abroad should counteract those trends.
"Everybody's impacted by a recession, but I would describe us as not being as impacted as others," Rudd said. "Even if there is a broad recession … the things that we do are going to receive funding, and funding for the long term."
That said, he noted that COVID-19 challenges were still in play, particularly in Asia.
"In mainland China, the ongoing uncertainties created by COVID policies continue to impact us, though we are managing through this," Rudd said.
Another hurdle for the company, Rudd said, was the endemic labor shortage in the engineering and construction industries.
"We think of it as a governor on growth," Rudd said. "There's no doubt that in our industry, there certainly are constraints on experienced professionals to deliver the work that we do."
Recent wins
Wins in the quarter included a contract with the Arizona Department of Transportation to develop a statewide plan to deploy EV charging stations. Likewise, New Jersey Transit selected AECOM to provide design and engineering services for its zero emission strategy.
Rudd said the wins show how the firm's "Ev-readi" digital tool helps clients integrate electrification of transit systems into existing infrastructure.
Other wins included a water reuse project in California and a PFAS remediation project for the city of Madison, Wisconsin.
AECOM shares gained about 4% in early trading Tuesday after the company's call.
