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On Friday, Goldman Sachs initiated coverage on AECOM Technology (NYSE:ACM) stock, a company specializing in infrastructure professional services, with a Buy rating and a 12-month price target of $130.00. The firm highlighted AECOM's strategic shift since 2020, which included divesting from its self-perform at-risk construction segment and focusing on areas where it has technical expertise and a competitive edge.
The analyst noted that the company now boasts a high-graded portfolio with an increased rate of winning complex projects, a move away from fixed-price risk, and an expanding market due to growth in program management and advisory services. Goldman Sachs' analysis pointed out AECOM's leading market share within its top end markets, emphasizing the industry's generally fragmented nature.
Goldman Sachs' positive outlook is based on the company's potential for double-digit earnings per share (EPS) growth in the medium term, driven by larger project scopes, higher win rates, and possible improvements in utilization. The firm also sees an opportunity for valuation growth as AECOM continues to shift its mix towards advisory and consulting services.
The investment firm's EPS estimates for AECOM in 2025-2026 are $5.11 and $5.81, respectively, which is a 2% increase over the FactSet consensus. This projection reflects the firm's confidence in AECOM's ability to outperform market expectations and solidify its position within the infrastructure services sector.
In other recent news, AECOM Technology reported noteworthy fourth-quarter fiscal year 2024 earnings, with a significant outperformance in margins leading to a profit that surpassed expectations despite lower-than-anticipated revenue. Analysts at Baird responded to the earnings report by increasing their stock price target for AECOM from $113.00 to $122.00, maintaining an Outperform rating on the stock.
AECOM's financial results indicate a consistent focus on margins, which has been a key element of its long-term strategy. The company provided fiscal year 2025 guidance slightly higher than the consensus, backed by a book-to-bill ratio greater than 1.0x, indicating a healthy level of contracted work.
In addition, AECOM's project pipeline grew by 10% compared to the previous year, with the company maintaining a win rate of approximately 50%. The company reported adjusted earnings per share of $1.27, surpassing analyst estimates of $1.24, but revenue of $1.81 billion was slightly below the forecasted $1.86 billion.
Looking ahead, AECOM anticipates adjusted earnings per share ranging from $5.00 to $5.20 for fiscal 2025, markedly above Wall Street's projection of $4.52. The company is also expecting organic net service revenue growth of 5% to 8% next year. These are the recent developments within AECOM, as the company continues to demonstrate a promising financial trajectory.
InvestingPro Insights
AECOM's recent performance and financial metrics align well with Goldman Sachs' bullish outlook. According to InvestingPro data, AECOM has demonstrated strong growth, with a revenue increase of 12.01% in the last twelve months as of Q4 2024, reaching $16.11 billion. This growth is complemented by a robust EBITDA growth of 13.96% over the same period, indicating improved operational efficiency.
The company's market position appears solid, with InvestingPro Tips highlighting AECOM as a "prominent player in the Construction & Engineering industry." This aligns with Goldman Sachs' observation about AECOM's leading market share in its top end markets. Additionally, the tip that AECOM "operates with a moderate level of debt" suggests financial stability, which is crucial for sustaining growth and pursuing larger projects as mentioned in the analyst's report.
AECOM's stock performance has been noteworthy, with InvestingPro data showing a 29.91% total return over the past year and a 26.73% return in the last six months. The stock is currently trading near its 52-week high, which corroborates Goldman Sachs' positive outlook and price target.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for AECOM, providing a deeper understanding of the company's financial health and market position.
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