Shares of AECOM (ACM) have been strong performers lately, with the stock up 4.4% over the past month. The stock hit a new 52-week high of $40.56 in the previous session. AECOM has gained 51.3% since the start of the year compared to the 35.4% move for the Zacks Construction sector and the 21.2% return for the Zacks Engineering - R and D Services industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 6, 2019, Aecom reported EPS of $0.72 versus consensus estimate of $0.71 while it missed the consensus revenue estimate by 3.67%.
For the current fiscal year, Aecom is expected to post earnings of $3.28 per share on $20.35 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $3.96 per share on $20.73 billion in revenues. This represents a year-over-year change of 18.08% and 1.86%, respectively.
Aecom may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Aecom has a Value Score of B. The stock's Growth and Momentum Scores are C and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 12.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 9.2X versus its peer group's average of 9.2X. Additionally, the stock has a PEG ratio of 1.31. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Aecom currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Aecom passes the test. Thus, it seems as though Aecom shares could still be poised for more gains ahead.
How Does Aecom Stack Up to the Competition?
Shares of Aecom have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Lennar (LEN), MasTec (MTZ), and Meritage (MTH), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Aecom. Still, the fundamentals for Aecom are promising, and it still has potential despite being at a 52-week high.
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