Aecom (ACM) is the world’s largest ESG-focused infrastructure company, working throughout a project’s lifecycle, explains Brendan Coffey, editor of Cabot SX Greentech Advisor.
Aecom designs and manages construction of stadiums (such as the first LEED Platinum stadium, Atlanta’s Mercedes Benz Stadium,) bridges (a 15-mile sea crossing in Malaysia), railways (converting an Italian railway from diesel to hydrogen,) and even cities (it’s managing the $15 billion revitalization of the historic Saudi city of Al Ula).
Los Angeles’ SoFi Stadium, the site of the latest Super Bowl, is a joint venture of Aecom and Turner Construction, and has gotten widely enthusiastic reviews, likely strengthening Aecom’s stadium niche.
The company also offers a host of environmental and planning services, from remediating PFAS – the “forever chemicals” — to assisting the FEMA with planning to develop “resiliency” around coastal and interior flooding coming about from the effects of climate change.
The Dallas-headquartered company is ranked as the top, or among the top, firms for chemical remediation, green design, desalination plants, solar plants, and water and hazardous management and transport, among other awards.
Transportation and facility businesses — think bridges, tunnels, buildings and airport terminals — are the two largest segments, each just about splitting evenly 70% of sales. Environment and water account for 28% of revenue while the renewable energy is 3%.
Most (54%) of sales come from the U.S., with state and local governments generating two-thirds of domestic revenue. Aecom makes money, with net, after tax, income more than $173 million or $1.16 a share last year.
Aecom expects 2022 to generate $3.30 — give or take a dime — in EPS and earnings before interest, taxes, depreciation and amortization of around $900 million. Growth is mid-single digits generally in its business, which management is supplementing by committing to returning capital to shareholders with the dividend and in the form of stock buybacks, having closed out a $1.2 billion program recently.
Our outlook is for Aecom continuing to strengthen, considering the expected flow of infrastructure bill money to state and local governments, as well as the fact that states are enjoying full tax coffers.
We don’t expect the infrastructure funds allocated in the November bill to start hitting Aecom’s top line until next year, but we should see an uptick in demand for advisory and planning services ahead of then. By 2024, management projects $4.75 EPS.
Understanding the market environment is less than favorable for "Greentech" stocksoverall, we’re going to add shares to our Real Money portfolio here. We’ll institute an initial sell-stop “around $65,” about 10% lower and well within our portfolio risk tolerance overall.
