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Aecom Technology (NYSE: ACM) is an engineering firm that specializes in transportation infrastructure. The company provides design services for projects including the new PATH terminal at the World Trade Center site, New York's Second Avenue Subway renovation, and the 1088-meter-span Sutong Bridge in China.

While technical engineering services account for a large percentage of Aecom's total business, the company has been actively growing its Management Support Services (MSS) division as well. MSS projects can range from developing global supply chains for humanitarian groups to establishing natural disaster contingency plans for corporations. The business unit has posted double-digit revenue gains in each year since 2005. [1] Much of this growth has come from contracts with the U.S. Department of Defense, which relies on commercial contractors for most of its logistics support and maintenance services in Iraq and Afghanistan. The intersection of the Iraq troop surge of 2007-08 and the growing need to maintain and overhaul aging equipment in the field has been a boon for Aecom which has grown into one the military's top trainers/managers of maintenance service personnel.

Yet there is a certain amount of risk to catering this closely to active military operations. In 2008, President Bush declared that troop draw-downs in Iraq will begin as early as 2009[2] and such actions will reduce the demand for Aecom's services. With more than 60% of its total revenues coming from publicly-funded sources,[3] the company is often exposed to volatile project funding brought on by shifts in the legislative priorities of these clients. The company has sought to minimize this risk by catering to governments of many different nations.

Business Overview

Business & Financial Metrics[4]

In 2009, ACM generated a net income of $190 million on revenues of $6.12 billion. This represents a 29.3% increase in net income and a 17.8% increase in total revenues from 2008, when the company earned $147 million on revenues of $5.20 billion.

Business Segments[5]

Aecom divides its business operations into two broad business segments: Profesional Technical Services (PCS) and Management Support Services (MSS).

  • Professional Technical Services (82.6% of revenue): This segment provides design, engineering, and construction management services with a particular focus on the transportation, environmental, and energy-related industries. Working for both government and corporate clients, PTS undertakes projects ranging from subway and light rail systems to water delivery and treatment facilities to wind and solar energy farms.
  • Management Support Services (17.4% of revenue): This segment offers facility management, personnel training, and field logistics for agencies of the U.S. federal government. Active projects include the maintenance and management of military bases and test ranges, implementation of training activities for U.S. law enforcement officers and the modification and overhaul of army transport and combat vehicles for the Department of Defense (DOD) domestically and in the field.


Trends and Forces

Diversification of Government Clients Reduces Risk of Project Cancellations

Most of Aecom's total revenues came from contracts with national, state, and local governments.[3] While this is usually the case throughout the industry, Aecom's focus on clients in foreign governments provides a buffer from spending volatility in any one country. Most of the risk from government contracts comes from the fact that they are subject to periodic approval and can usually be canceled--without penalty--by the client. Government expenditures can vary greatly from year to year depending on tax revenues, the party in power, military realities, and public perception of a given issue, and budget cuts often lead to funding cuts or cancellations of government contracts. By spreading its projects between a number of different national governments, Aecom reduces the effect that volatility in any one government can have on its cash flow.

Improvements to U.S. Transportation Infrastructure Presents Opportunity for Domestic Growth

The company's history and expertise in transportation position it well to take advantage of what industry experts say will be a necessary increase in total infrastructure spending in the time period between 2008 and 2013. [6] The American Society of Civil Engineers estimates that the U.S. will need to spend roughly $250 billion dollars over that time to ensure the continued safety and operation of the nation's transportation infrastructure. [7]


Aecom faces competition in both of its market segments from engineering giants KBR (KBR), Jacobs Engineering Group (JEC), Fluor (FLR), CH2MHill. Additionally, its PTS division competes for design and engineering projects with Tetra Tech (TTEK), Black & Veatch, SAIC (SAI) and URS (URS) among others.


  1. ACM, 2007 10-K Report, Note 19: Reportable Segments, p. 81
  2. | CNN.com, "Bush to announce Iraq troop reduction," 9/8/2008
  3. 3.0 3.1
  4. ACM 2009 10-K pg. 25  
  5. 5.0 5.1 ACM 2009 10-K pg. 3  
  6. | American Society of Civil Engineers, 2005 Infrastructure Report Card; Taken from sections: Bridges, Roads, Transit, and Rail
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