ACM: Staying the course

Research evidence excerpt

ACM: Staying the course

ars, and we expectimprovement over our forecast horizon, and a ROIC at the

continued share repurchase activity going forward (albeit onhigh end of the company’s peer group. The company’s strong

an opportunistic basis). AECOM also recently introduced itsFCF and clean balance sheet also support the outlook for

first-ever dividend, and we expect double-digit % increasessignificant return of capital over the coming years. Our price

in its dividend annually (directionally in line with its earningstarget supports our Outperform rating.

growth).

Upside scenario Risks to rating and price targetIn our upside scenario, we assume AECOM generates better-

Key risks to our price target and rating include: 1) economicthan-expected organic revenue growth and margin expansion

weakness, which would negatively impact private sectorahead of its near- and medium-term guidance ranges (driven

demand; 2) labour shortages and upward pressure on wages,by improved revenue mix and cost containment). Applying a

which could impact the company’s ability to deliver on~14x multiple to our blended F2026/F2027 Adjusted EBITDA

projects and/or impact margins if higher costs cannot beforecast drives our upside value of $132.

passed on to clients; 3) significant exposure to government

Downside scenario clients (50%+ of Net Service Revenue from government

contracts); and, 4) foreign exchange (strength in the U.S.In our downside scenario, we assume organic revenue

dollar, relative to local currencies in which the companygrowth is short of expectations and higher-than-expected

operates, could negatively affect reported results).costs combined with lower-than-expected efficiencies drive

margins below our forecast and the company’s guidance

range.