AECOM is a leading engineering and design firm focused on infrastructure-related end markets. A new management team has transformed the company into a high-performing professional services firm with limited exposure to high risk construction projects and a new focus on higher value Program Management and Advisory engagements.
With meaningful exposure to mega trends within water, transportation, environment, and reshoring we expect AECOM to experience growth tailwinds over coming years.
Roughly 60% of AECOM’s revenue is generated in the America’s segment, with the remaining international business being focused primarily on the UK, Ireland, and Australia.
Historically, AECOM was a typical Engineering & Construction (E&C) firm that would bid on projects to both design and construct the project. In these arrangements, the E&C company often agrees to a fixed price contract and takes on the financial risk of projects running over-budget, which is often the case.
In 2020, a new management team took over atAECOM and under a new vision, they sold the traditional Construction assets and focused on the lower-risk engineering/design aspects of the business. Further, they have built expertise and exposure to the even higher value (and higher margin) Advisory and Program Management opportunities within these large projects.
This change has transformed AECOM from a traditional E&C firm to a professional services organization focused on infrastructure-related consultancy and design.
AECOM is significantly exposed to trends in water, transportation, environment, and reshoring.
In water, the company has made a focused effort to expand their capabilities in this market, having recently hired a top executive from a competitor to lead this division. In addition to wide-ranging expertise across wastewater, water distribution, and drought response/ mitigation, the company has proprietary technology to remediate PFAS contamination.
In the transportation market, AECOM is a leading designer for highway projects as well as rail transit and aviation. The continued urbanization of populations and aging of infrastructure provide tailwinds to their business.
AECOM’s exposure to the environmental markets is focused around environmental management, remediation, electrical grid, and renewable energy. AECOM benefits from continued investments in the hardening of our energy infrastructure and the addition of new sources of generation to the grid.
Reshoring is a meaningful tailwind to AECOM as new facilities being built or optimized domestically offers opportunities for AECOM to advise stakeholders across the public and private markets. Beyond facilities, a renewed domestic manufacturing footprint would demand further infrastructure investments.
AECOM’s brand is well-recognized in their key markets as in most of the categories where they operate there are only 2-3 players of significance. While there is a wider peer group of companies they may compete with from traditional E&Cs to management consultants, there are a few players with the depth of expertise and talent that AECOM can offer.
We took a 3% position in AECOM. We see opportunity for double digit growth from these levels but would look to add to the position if we see further volatility.
