A $337 Million Project Charge Forces AECOM to Cut Its Full-Year Guidance
AECOM spent most of its fiscal third-quarter release describing a business in good health, then spent the rest of it explaining why one project had upended the year. The infrastructure consulting firm reported results on August 10 that included a $337 million pre-tax loss tied to a construction management project, a charge large enough to swing the quarter to a loss and force a reduction in full-year guidance.
The reported numbers show the damage. Revenue for the quarter was $3,586 million and net service revenue was $1,609 million, but the company posted a GAAP loss of $0.65 per diluted share and an adjusted loss of $0.50 per share. Adjusted EBITDA came in at negative $8 million. Absent the charge, those lines would have looked entirely different, which is precisely the argument management made in the release.
AECOM attributed the charge to delays and subcontractor productivity issues that drove cost overruns on the project, with substantial completion now expected in the second quarter of fiscal 2027. Shares fell about 4.5% in Tuesday's session, per TheStreet's market coverage, and Investing.com reported the stock down roughly 4% on the combination of the earnings miss and the lowered outlook.
The revised guidance quantifies the hit. AECOM now expects fiscal 2026 adjusted earnings of $3.95 to $4.15 per share, adjusted EBITDA of $935 million to $965 million, net service revenue of $7.30 billion to $7.35 billion and free cash flow of approximately $300 million. Excluding the project charge, the company said the comparable figures would be adjusted earnings of $5.90 to $6.10 per share on net service revenue of $7.65 billion to $7.70 billion.
That roughly $1.95 per share gap between the reported and ex-charge guidance ranges is the number investors will carry into fiscal 2027. It is also the number that determines whether this is read as an isolated project failure or as a signal about how AECOM prices and manages risk in its construction management segment, a business with a different risk profile from the design and advisory work that makes up most of its revenue.
Management leaned on the rest of the portfolio. Total backlog reached $27,816 million, up 13% year over year and an all-time high, on a book-to-burn ratio of 1.6 times and design wins of $4.0 billion in the quarter. Chief executive Troy Rudd said the quarter "included several key highlights, including record wins and an all-time high backlog, which make us very confident in the health of the business."
President Lara Poloni pointed to the same figures, noting that "our backlog increased by 13% and we were successful in capturing two of the largest recompetes in our Company's history." Recompetes, in which an incumbent defends existing work against rival bidders, tend to be lower-risk revenue than new construction management awards, and retaining two large ones supports the argument that the underlying franchise is intact.
The report lands in a season where guidance revisions have overwhelmingly gone the other way, with FactSet data showing an unusually high share of S&P 500 companies raising rather than lowering outlooks. That makes AECOM's cut conspicuous, and it puts the burden on the company to demonstrate over the next two quarters that the charge was confined to a single job rather than symptomatic of broader estimating problems as the project moves toward completion in fiscal 2027.
