Citi Adds Aecom To Focus List, Swift Transportation Removed

While shares of Aecom ACM have been under pressure and lagged peers, Swift Transportation Co’s SWFT shares have had a strong run since late June. Citi’s Scott T Chronert added Aecom to the Value Creators SMID Focus List, while removing Swift Transportation from the list.

Analyst Chronert maintained Buy ratings on both companies, with a price target of $43 for Aecom.

Performance Of Shares

Following Aecom’s M&A activity in 2014, the company’s shares have lagged peers. The recent sell off in Aecom’s shares has been driven by concerns over the company’s high leverage and exposure to oil and gas end-markets, presenting “a compelling entry point,” Chronert mentioned. He noted, however, that Swift Transportation’s shares had limited upside, following the gains since late June.

FCF Performance

While saying that Aecom’s self-help story remained intact, the analyst pointed out that management had been using the company’s robust FCFs to significantly pay down debt. “Since it made a large transformative acquisition in 2014, Aecom has paid down roughly $1 billion in debt, which is significant given its current market cap of $4.5 billion.”

Aecom has also addressed concerns around its sensitivity to oil and gas markets by shifting its focus to government related services, which now contributes ~35 percent of profits. “Aecom’s Americas Design business is one of the few plays that is directly levered to improving infrastructure spending, one of the few issues both US presidential candidates seem to agree on,” Chronert wrote.

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