Why Is Aecom (ACM) Down 12% Since Last Earnings Report?

Core Viewpoint - AECOM's recent earnings report showed mixed results, with earnings missing estimates and revenues declining year-over-year, while the backlog reached a record high, indicating sustained demand and potential for future growth [2][3][4]. Financial Performance - Adjusted earnings per share (EPS) for Q1 2025 was $1.29, missing the consensus estimate of $1.41 by 8.5% and down 1.5% from the previous year [3]. - Total revenues were reported at $4.01 billion, a decline of 4.6% year-over-year, while net service revenues (NSR) increased by 2.7% to $1.85 billion [3][4]. - Adjusted operating income rose 9% year-over-year to $214 million, with an adjusted operating margin expanding by 120 basis points to 19.9% [6]. Backlog and Opportunities - The total backlog reached a record high of $25.96 billion, up 9% from the previous year, with a book-to-burn ratio of 1.5x, indicating strong demand [4]. - The design backlog increased by 7.6%, and the pipeline of opportunities also saw double-digit growth, driven by strong performance in both the Americas and International segments [4]. Segment Performance - Americas' revenues were $3 billion, down 4% year-over-year, while NSR increased by 9% to $1.1 billion [5]. - International revenues decreased by 5% to $854 million, but NSR remained stable at $736 million [7]. Cash Flow and Liquidity - Cash and cash equivalents at the end of Q1 were $1.25 billion, down from $1.59 billion at the end of fiscal 2024 [10]. - Operating cash flow decreased by 54% year-over-year to $70 million, and adjusted free cash flow declined by 62% to $42 million [10]. Guidance and Outlook - AECOM raised its fiscal 2026 adjusted EPS guidance to a range of $5.85-$6.05, indicating a 12% improvement from fiscal 2025 levels [11][12]. - The company expects adjusted EBITDA to be between $1,270-$1,305 million, reflecting a 7% year-over-year growth at the midpoint [12]. - Long-term financial targets include achieving a 20%+ margin exit rate by fiscal 2028 and delivering adjusted EPS growth at a 15%+ CAGR from fiscal 2026 through fiscal 2029 [13]. Market Sentiment - Recent estimates for AECOM have trended upward, with a consensus estimate shift of 12.77% [14]. - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [16].