Wall Street Doesn’t Dig Australian Mining Woes

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Shares of Aecom Technology Corp. cratered last week amid a slowdown in Australian mining and trouble in its U.S. business.

The downtown L.A. company, which does construction and engineering for commercial and government clients, cited those factors as it lowered its earnings forecast for its current fiscal year.

The company now expects to generate earnings equal to $2.30 to $2.40 a share, lower than a Wall Street consensus average of $2.45. The revision sent shares down 13 percent for the week ended Aug. 7 to close at $29.49, making it one of the biggest losers on the LABJ Stock Index. (See page 32.)

“As we look at the balance of our year, we expect continued softness in Australia and less than previously expected growth in the Americas,” Steve Kadenacy, the company’s chief financial officer, said on a conference call with analysts.

The company nonetheless reported net income of $70.7 million (70 cents a share) for the quarter, up 2 percent from the same period a year ago thanks to lower costs. Revenue fell 1 percent to $2.07 billion, due to a $100 million decrease from Australian mining operations.

Just a year ago, the Australian mining industry was booming, spurred by huge Chinese demand for raw materials. But Chinese leaders have put the brakes on growth, and mining in Australia, where Aecom contracts with mining companies for construction and engineering services, has suffered.

Meanwhile, the company’s revenue for its North and South American operations was flat.

Tahira Afzal, an analyst at Keybanc Capital Markets in New York, said it has been hard to get large public infrastructure projects started in the United States due to uncertainty in federal spending. The start of a new fiscal year for the federal government in October is a source of hope.

Aecom reported that its backlog of work grew 6 percent for the quarter, to $16.8 billion. Of that number, there were $1.9 billion in new contracts, which executives believe will help fuel future growth.

“We think that Australia, the mining sector, will come back. It always does. It’s just a matter of time,” Aecom President Mike Burke said during the conference call. “And the rest of the business, while it was flattish, the wins were up. So that’s how we see (growth) coming back.”

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