Story updated at 9:50 a.m. to reflect market activity.
Shares of AECOM gained 3.8% to $36.40 in morning trading.
The firm raised its price target for the company to $40 from $33. The URS (URS) transaction is expected to drive earnings accretion with cost synergies, debt reduction, and strong cash flow according to UBS analysts.
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Separately, TheStreet Ratings team rates AECOM TECHNOLOGY CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate AECOM TECHNOLOGY CORP (ACM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
- AECOM TECHNOLOGY CORP's earnings per share declined by 22.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AECOM TECHNOLOGY CORP turned its bottom line around by earning $2.36 versus -$0.57 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $2.36).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.3%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Construction & Engineering industry and the overall market, AECOM TECHNOLOGY CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ACM Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.