This infrastructure company reported quarterly earnings of $0.71, handily beating the consensus estimate of $0.56.
AECOM Technology (ACM)
from PAD System Report
AECOM Technology is an “infrastructure” play. This word is one that makes most economists salivate. Infrastructure refers to roads, bridges, dams, ports, airports, and water and power distribution. Well-functioning infrastructure underlies most advanced economies, and deteriorating infrastructure can hold back economic growth. Repair of this infrastructure can provide economic returns that are often found to be higher than any other form of government spending. And the US, and other countries, have deteriorating infrastructure which needs urgent repair.
In the depths of the recession in 2009, the US economic stimulus law was passed by Congress in part because it was targeted at infrastructure repair. And yet the job is hardly done, with an enormous and growing backlog of long-overdue highway and bridge repair. Much of the rest of the world also needs infrastructure repair, or needs brand-new infrastructure.
AECOM designs, manages, and consults on this work, and turns a good profit in the process. After several years of flat earnings, growth is again returning (the latest quarter handily beat VL estimates), and should accelerate to a double-digit rate for the next 3-5 years.
The stock is reasonably priced at 10 times this year’s projected earnings, a sharp discount to the market’s p/e. Financial strength is adequate at B++, two levels above the PAD minimum of B. With 3-5 year appreciation potential of 55-80, the stock looks very cheap in an otherwise pricey market. We will buy 500 shares at market.
Daniel A. Seiver, PAD System Report, www.padsystemreport.com, Dept of Finance, S.D.S.U, San Diego, CA 92181, February 28, 2015