The progress that AECOM Technology was making this year screeched to a halt. For the fourth fiscal quarter ended September 30, sales fell 2%. The Professional Technical Services (PTS) segment, the firm's dominant source of sales, fell 3%, while the smaller Management Support Services (MSS) segment grew 11%. The company is struggling with the contracting global economy, particularly Europe. Earnings took a big hit as AECOM recorded a $317 million after-tax impairment charge spread over both business segments. Without the charge EPS actually grew 10%, to $0.83, as previous cost-cutting efforts helped profit margins.
For Fiscal 2013 the company is taking a cautious approach and expects EPS of $2.40-$2.50, up 4%-9%. The company indicated its best use of capital during this global slowdown is to aggressively repurchase stock and pursue accretive acquisitions.
ACM is a buy up to 23. Our analysts see the potential for a 20% total annual return through 2017 if the company can meet our goals for EPS growth.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.