On Thursday, Truist Securities began its coverage of AECOM Technology (NYSE:ACM), assigning the infrastructure services firm a Buy rating and setting a price target of $106. The firm highlighted AECOM's position as a pure-play infrastructure professional services provider, offering a range of services including advisory, planning, design, engineering, and program and construction management.
The optimism surrounding AECOM is rooted in its record backlog and its focus on end markets that are expected to exhibit strong secular growth. These markets are anticipated to benefit from various infrastructure stimulus measures such as the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act, Chips Act, and initiatives supporting onshore manufacturing.
AECOM has recently refined its geographic focus, withdrawing from 30 countries with lower returns. Currently, about 90% of AECOM's profits are derived from markets that are considered more stable, such as the Americas, the UK, Ireland, and Australia. Moreover, AECOM's concentration on sectors like transportation, water, and environmental/new energy is seen as a strategic advantage.
The company's design backlog, which serves as an indicator of future earnings potential, is at an all-time high. This factor, among others, leads Truist Securities to believe that AECOM's business model will demonstrate greater earnings resilience throughout economic cycles, justifying a higher valuation for the company's stock.
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