$24.54
0.09 (+0.37%)
AECOM Technology Corp (ACM)
CAPS Rating:
The Company provides planning, consulting, architectural and engineering design and program and construction management services for a range of projects including highways, airports, bridges, mass transit systems, to government and commercial clients.
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The Global Infrastructure play is hardly a novel idea, given the overseas building boom and election-year rhetoric about constructing more roads and bridges within the U.S. Yet Aecom Technology (ACM) has fallen 20% over the past seven months, a far cry from other infrastructure stocks pushing 52-week highs.
With more than $4.2 billion in annual revenue, the Los Angeles engineering and consulting firm is one of the chief beneficiaries of infrastructure demand. Yet it flies under the radar of many investors: It has a nondescript name and scant coverage on Wall Street. It has more than 35,000 employees in some 60 countries in virtually every market from energy to transportation, yet that geographic and operational diversity also make it hard to pin down. It is classified as a technology-consulting firm, although its fortune rises and falls with global infrastructure demand.
Since it went public nearly a year ago, Aecom shares have quickly shot up from around 21 to 38, but have since fallen below 30 amid mounting concerns about waning demand -- evidence of which hasn't yet surfaced. This month, it reported a 69% jump in second-quarter income and a 20% increase in its growing backlog, to $7.1 billion. Besides beating Street estimates yet again, it raised its 2008 outlook.
Shares trading at 22.2 times projected 2008 earnings are by no means cheap, but they are hardly unreasonable compared with the 21.1 times for the information-technology consulting and services sector, and look downright appealing next to the 29 multiple for infrastructure darlings like Fluor (FLR) and Jacobs Engineering (JEC). The company also has a reputation for being well run, and it has no debt.
It all sounds very good but this article from Barron's fails to compare ACM with its most similar peer - URS, which trades at a cheaper 16x P/E. It is ridiculous to compare ACM with players like FLR that have high exposure to energy projects of which ACM has close to none. When you compare ACM with the right peer, it actually looks more expensive than it does cheap.