AECOM (NYSE:ACM) reported financial results for the first quarter of its fiscal 2026 that surpassed analyst expectations on profitability, even as reported revenue declined. The global infrastructure consulting firm's performance and raised full-year guidance appear to have been received positively by investors, with the stock trading higher in after-market activity following the announcement.
Earnings and Revenue Versus Estimates
The company's results presented a mixed picture when viewed through the lens of common headline metrics, but its preferred operational measures showed strength.
- Non-GAAP Earnings Per Share (EPS): AECOM reported adjusted EPS of $1.29, which came in 10.9% above the analyst consensus estimate of $1.1774. Management noted that adjusting for a lower tax rate in the prior-year period, adjusted EPS increased by 8%.
- Net Service Revenue (NSR): The company emphasizes NSR, which excludes pass-through subcontractor costs, as a clearer measure of its operational performance. This metric reached $1.85 billion, representing a 5% year-over-year increase when adjusted for fewer working days in the quarter. This growth was not directly comparable to the analyst revenue estimate of $3.65 billion, which was based on total GAAP revenue.
- GAAP Revenue: As reported under standard accounting principles, total revenue was $3.83 billion, a 4.6% decrease from the prior year. This decline was attributed to a reduction in pass-through revenue.
Market Reaction and Price Action
The market's initial reaction to the report has been favorable. Following the earnings release, AECOM's stock saw an after-market gain of approximately 2.7%. This positive movement suggests investors are focusing on the earnings beat, improved margins, and the company's increased guidance rather than the headline revenue decline. The stock had been relatively flat in the weeks leading up to the report.
Key Highlights from the Quarterly Report
Beyond the earnings figures, management highlighted several areas of operational strength and strategic progress.
- Record Backlog and Strong Bookings: Total backlog grew 9% year-over-year to a record $26.0 billion. The company achieved a book-to-burn ratio of 1.5, marking its 21st consecutive quarter with a ratio above 1.0, indicating it is winning more work than it is completing.
- Expanding Profitability: Adjusted EBITDA increased 6% to $287 million. The segment adjusted operating margin and adjusted EBITDA margin both expanded significantly, reaching 16.4%—an increase of 100 and 80 basis points, respectively. This expansion occurred despite continued investment in AI, technology, and business development.
- Raised Fiscal 2026 Guidance: Based on the first-quarter outperformance, AECOM raised its full-year earnings outlook. The company now expects adjusted EPS in the range of $5.85 to $6.05, up from a prior range of $5.65 to $5.85. It also reiterated its long-term target of achieving a 20%+ segment operating margin by fiscal 2028.
- Strategic Review Concluded: The company announced it has completed its review of strategic alternatives for its Construction Management business and has decided to retain and continue operating the unit.
- Capital Return: During the quarter, AECOM returned more than $340 million to shareholders through share repurchases and dividends. Subsequently, its Board of Directors increased the share repurchase authorization to $1 billion.
Outlook Compared to Analyst Estimates
The company's raised guidance for fiscal 2026 provides a benchmark against future expectations. AECOM's new adjusted EPS guidance range of $5.85 to $6.05 has a midpoint of $5.95. For the full fiscal year 2026, analysts have been estimating sales of approximately $14.75 billion and revenue of $5.40 billion; however, it is important to note that AECOM's internal "revenue" guidance is based on Net Service Revenue growth of 6% to 8%, which is not directly comparable to these figures. For the upcoming second quarter, analysts are currently modeling sales of $3.60 billion and revenue of $1.28 billion.
For a detailed breakdown of historical earnings, future estimates, and analyst projections, you can review more information here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, an endorsement, or a recommendation to buy, sell, or hold any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
