Credit Suisse Can Re-rate AECOM’s Infrastructure Stimulus Tailwinds; Prompt Upgrade by AECOM

• Credit Suisse Jamie Cook, analyst upgraded AECOM (NYSE: ACM) from Neutral to Outperform and raised the price target from $95 to $98.

• The analyst believes that ACM, a pure-play in professional infrastructure services will reap the benefits of secular tailwinds associated with infrastructure stimulus in the U.S.A and globally.

• ACM anticipates that multi-year tailwinds resulting from Infrastructure Investment and Jobs Act will occur in the United States of America by 2023 and beyond.

• ACM will be one among the early beneficiaries because of its involvement with front-end engineering.

• Internationally, there is still strong demand in Australia and Canada. However, near-term macro uncertainty has impacted the long-term outlook for Saudia Arabian and U.K. markets.

• ACM has exited lower-returning markets and focuses organic investments in the highest yielding opportunities including advisory and program management businesses. These increase the total addressable market for ACM, and position ACM as a low–risk business model.

• ACM also has invested in digital capabilities to improve its delivery of business.

• These efforts have resulted in higher win rates for the company, between 45-50% and support organic growth and margin expansion FY23.

• ACM reiterated its FY24 goals. ACM maintains a disciplined capital allocation strategy.

• ACM is proud of its high earnings quality. It consistently targets 75% FCF conversion of EBITDA without any levies throughout the cycle.

• An analyst believes that ACM will continue to rerate over time if they can grow EPS organically to close to 20% CAGR, while returning cash to shareholders via consistent dividends and share repo.

• Price Action ACM shares traded at $85.68, up 2.01% since Thursday’s last check.

• Photo via Wikimedia.

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