Engineering giant AECOM’s fiscal second-quarter revenue dipped by 3 percent, from $4.51 billion in 2015 to $4.38 billion this year, according to earnings numbers released Tuesday. Earnings per share landed at $0.27, with adjusted earnings per share up by half on a year-over-year basis, from $0.58 to $0.87.
Net income for the three-month period ending March 31 was $42 million, on operating income of $141 million.
“We made steady progress against our key strategic and financial objectives, most notably the return to growth in the Americas, continued strong cash generation, and additional debt reduction,” AECOM Chairman and CEO Michael S. Burke said in a press release. “We have a vastly diverse business and remain confident in our ability to capitalize on the momentum we see building across our end markets.”
Among numerous business lines, AECOM is a major player in nuclear cleanup and facility management contracts for the Department of Energy and its semiautonomous National Nuclear Security Administration. It is a partner in the consortiums that manage the Los Alamos National Laboratory (LANL) in New Mexico, the Nevada National Security Site, and Washington Closure Hanford, and leads the group of companies that provide liquid waste remediation at the Savannah River Site (SRS) in South Carolina and transuranic waste storage at the Waste Isolation Pilot Plant in New Mexico.
Organic revenue in the company’s Management Services segment, which encompasses the DOE and NNSA contracts, among others, rose 5 percent, while revenue overall hit $869 million. AECOM has $12 billion worth of bids under consideration in this segment, up from $7 billion in the prior quarter. That is divided between new offers and contracts that are being recompeted, Burke said during the company’s earnings conference call. These opportunities include a $5 billion contract in which AECOM is seeking to move from subcontractor to prime contractor, he said: “Because of new capabilities in size and scale of our organization, we can compete as a prime instead of going at it for a sub.” Management did not identify the customer for that contract.
AECOM has indicated interest in competing for the SRS liquid waste contract held through June 2017 by Savannah River Remediation, in which it currently partners with Bechtel, BWXT, and CH2M. The current management and operations contract for LANL, held by Los Alamos National Security (which teams AECOM with Bechtel, BWXT, and the University of California) also will be rebid ahead of its expiration in 2018. Meanwhile, a Lockheed Martin subsidiary’s contract to run the nearby Sandia National Laboratories is similarly up for grabs for 2017.
In addition to the bids already being evaluated, AECOM has identified $40 billion worth of future opportunities in Management Services, Burke said, without discussing specific projects. Management Services covers a broad range of markets, from national security to cyber support to information management, and for the trailing 12 months represented 18 percent of AECOM’s revenue.
“Listen, it’s a competitive market, and it has been for a while, but our win rates in that market are as good as they’ve ever been. We think our capabilities, given our new size and scale are differentiated in the market,” Burke said. “And there’s a high barrier to entry in the markets that we’re talking about here. This isn’t old style LOGCAP work, where just about anybody could do it, we’re talking about work that is very, very highly qualified work with technical capabilities, for intelligence community or defense, that has enormous barriers to entry. So, you’re not going to see people moving over from the low level price competitive work to move into our space, if they’re not already there.”
Quarterly revenue for AECOM’s Design & Consulting Services segment was $2 billion, while its Construction Services business collected $1.5 billion but endured ongoing weakness in the oil and gas operations, where adjusted operating income dropped from $26 million in the 2015 quarter to $19 million this year. The company’s backlog stood at close to $39 billion in the quarter.
AECOM reaffirmed its projection for full-year adjusted earnings per share of $3 to $3.40.
