"AECOM Technology (NYSE: ACM) is set to take advantage of stimulus money and the global push to expand energy and infrastructure projects," says Ian Wyatt in Top Stocks Insights.
"The company is a global provider of professional technical and management support services to the transportation and energy industries, serving clients in more than 100 countries.
"The American Recovery and Reinvestment Act, which was signed into law on Feb. 17, will provide an excellent source of new project funding. Funding from this act, $170 billion, will go toward projects for highway, rail, school modernization, energy and water infrastructure.
"The company is primarily focused on the environmental and transportation end markets. These markets are diversified across all major continents. The United States represents the largest concentration of projects, with Asia and Canada close behind.
"Why we like AECOM:
- Growing sales and expanding EBITDA margins.
- Backlog continues to experience growth.
- Strong funding for infrastructure projects.
- Second-quarter 2009 performance was excellent.
- Gross revenue was up 29% to $1.5 billion.
- Service revenue increased by 29% to $966 million. This segment also experienced margin expansion.
- Net income was up 20% to $43 million, or $.40 EPS.
- Backlog increased 30% to $9.2 billion.
- AECOM confirmed fiscal 2009 guidance to be $1.60 to $1.70 EPS.
"AECOM continues to expand margins and grow its revenue stream. The company is poised to take advantage of the global push to expand energy and infrastructure projects.
"Most of this expansion is a result of government stimulus projects designed to boost the economy. We are optimistic about AECOM's ability to keep winning new projects in new markets.
"The shares currently trade at 18 times a current year EPS estimate of $1.68 and 15 times next year's EPS of $2. Both of these multiples are significantly greater than the industry average. Shares of ACM are worth a premium.
"This is one of the fastest-growing companies in the technical services industry. Accordingly, we believe shares should be trading at a least 18.5 times forward EPS, which is closer to our EPS growth projection. This results in a $37 price target."
