Shares of AECOM Technology Corp. (NYSE:ACM) are sharply higher this week after the infrastructure company issued the fourth quarter earnings announcement. Since the company operates with a September year end, 2009 is now in the books and it has been a decent year. For the fourth quarter, the company earned $0.48 per share which beats the street expectations which were at 46 cents. The earnings represent a 20% increase in profit versus last year, and for 2009 in total, the company grew earnings by 19%.
Part of the strength of this company is the fact that AECOM receives a significant portion of their revenue from overseas. With the dollar in a pronounced downtrend against most major currencies, this means that sales paid in Euros, Yen or other currencies are translated back to reflect higher dollar levels. So international trade is not only helpful as far as diversifying between regions, but has also been helpful from a foreign exchange perspective.
The quarter was characterized by significant contract wins which will set the company up for success in the coming years. A strong backlog of work is important for firms like AECOM which must complete some individual customer projects over the course of several years. As existing projects near completion and are converted into revenue, the sales team must work hard to line up new contracts in order to remain stable.
During the quarter, we won over $1.8 billion in new projects, highlighted by several mega projects. These wins, coupled with three recently announced acquisitions, make AECOM well positioned for continued success.
~John M. Dionisio, CEO
Total project backlog was listed at $9.5 billion at the end of September which represents a 10% increase over the past year. That’s enough work to keep the company busy for another 18 months at the current rate of quarterly revenue. The backlog is a record for the company and points to both the skill of the company in landing new projects and the strength of the industry as opportunities become available.
While AECOM continues to operate on a global basis, management is expecting the US to play a major role in the profitability of the company over the coming two years. During the conference call, management noted that US stimulus funds have begun finding their way to specific projects. 2010 and 2011 will be important periods for these projects and US stimulus should be a significant growth driver for ACM.
Management issued guidance for 2010, with earnings expected to fall between $1.90 and $2.00 per share. While this is a touch below analyst expectations, there is a good chance that management is being overly cautious with its guidance in order to set the company up to exceed expectations. The growth in backlog coupled with stimulus spending should allow the company to easily exceed this target.
After the announcement, the stock traded up to a level near $27. The price level represents a multiple of 13.5 times management guidance for 2010 profits. This is a conservative price considering the growth of the company, the stability of the business, and the strength of its balance sheet. AECOM has acquired several attractive companies this past year which will add to earnings and allow the firm to reach a broader client base. In short, it looks like the stock has much farther to run and I would encourage investors to continue to build positions in this solid infrastructure company.
Disclosure: Author has a long position in the ZachStocks Growth Model