Fear of the fiscal cliff helped drive down most companies’ stock prices last week, and the big engineering and construction firms that do billions in government work were no exception.
But downtown L.A. engineering and technical services giant Aecom Technology Corp. fell further than others, as the company reported an annual loss and lower-than-expected earnings guidance for the year ahead.
The Bloomberg index of engineering and construction firms in the Americas fell less than 6 percent for the week ended Nov. 14. Aecom shares were down 13 percent, closing at $19.32. That made the company one of the biggest losers on the LABJ Stock Index. (See page 44.)
Aecom reported that it lost 52 cents per share for the year ended Sept. 30. The loss came from a write-down of $317 million, or $2.88 a share, on the value of the company’s operations in Europe and its management support services segment.
On a Nov. 13 conference call with investors, Stephen Kadenacy, Aecom’s chief financial officer, said lower revenue in the management services segment was due to the pullout of American troops from Iraq, where the company had big contracts to manage and maintain facilities and equipment.
“We have not replaced the revenue loss from Iraq and this has prevented the business from returning to its previous profit levels,” Kadenacy said.
Aecom executives declined to comment for this story.
Not including the impairment charge, the company reported earnings of $2.30 per share, a penny more than analysts expected. But Chase Jacobson, who follows Aecom as an analyst at the New York office of William Blair & Co. LLC, said he’s more worried about the coming year’s earnings.
Aecom executives said earnings for fiscal year 2013 should be between $2.40 and $2.50 a share, lower than analysts’ consensus estimate of $2.54. Jacobson said that estimate was already on the low side.
“We believe the company’s outlook for flat to modest revenue growth was below already low expectations,” he wrote in a Nov. 13 research note.
Jacobson had estimated earnings of $2.65 a share for 2013, based in part on the company’s previously announced initiatives to cut costs and improve margins.
Kadenacy said those initiatives are working, but that they aren’t leading to higher profits yet. For now, they’re helping the company maintain margins in the face of a still sluggish economy and a competitive marketplace that’s keeping prices low.
“They’re enabling us to compete in these tough economic headwinds,” he said.
