Sunday, January 8, 2017

Infrastructure Stocks for 2017 - Aecom [ACM]

Aecom  [ACM]

     The infrastructure industry is a hot topic as we roll into 2017. The Trump administration has said part of the plan to 'Make America Great Again' is to fix the crumbling infrastructure. That being roads, bridges, water structures, and things of that nature. Estimates have placed the total cost to fix all the roads and bridges to be in the trillions of dollars. Trumps believes his plan will pay for itself. He'd offer 137 billion in tax credits to private companies hired to fix the problems. The money the private companies save from the tax credits is assumed to be made back in tax revenue from the increased wages paid out to the employees and the profits to the contractors. Whether that is true and capable of happening, it's clear that Trump and wants to spend some money on building some things. (Some info gathered from article here

     With that basic idea in mind I looked up a couple different stocks that could benefit from an increase in spending infrastructure. I ended up finding 4 or 5 that I liked and that I'll be posting throughout the week. Without further ado, I bring to you Aecom.

     Before we get into any charts, let me give a brief description of what Aecom does and why they can be successful in the coming weeks/months/years. Aecom designs, builds, finances, and operates infrastructure assets worldwide. Most recently, they won the bid for the $4.4 billion San Onofre decommissioning contract. San Onofre is a nuclear generating station, about 20 miles south of Laguna Beach, has been closed wince 2013. Aecom will be working on deconstructing and decontaminating the area. The project is expected to create 600 jobs over the next 10 years.

     Aecom will be partnering with Toll Brothers to develop and construct a $130 million luxury rental community in Washington D.C. They will be supervising the construction process.

     They are in the news again for the Sacramento Kings stadium they designed and constructed back in 2013. Golden 1 Center is on the list for best sports stadiums in 2016, is run 100% on solar power and is impeccably aesthetic. Even the roof is retractable for when the weather allows an open air concept.

      The management and most other people are pretty bullish on the productivity of this company for 2017. Here is a look at the daily, then weekly chart for ACM.

First is the daily. The chart itself looks pretty nice. RSI and stochastic is run-of-the-mill in the 50 area. Not overbought or oversold. The MACD is in a downtrend, but it's still positive. A good sign is looking at the moving averages. One of my favorites recently in determining longer run trends. They crossed above the 200 back in middle November for the exponential [green] and then early December for the simple average [blue]. It has already come down from being overbought and I would think now might be an okay time to get in on this one. 

     The weekly chart is similar to the daily, obviously I guess, but shows a couple differences. First of all, the longer term shows the stock is more overbought with the higher MACD and stochastic reading. The RSI is above 50, but still hovering right around that midway line. Again, the moving averages here are very similar to the daily chart [they aren't always so synonymous] and could show the beginning of an upward trend. However, with the huge jump in November from the election of Trump the moving averages could be falsely increasing. In two week the price of Aecom went from just under $28 to about $36.50. Using these two numbers, we see a 30.35% gain in the share price. It's very easy to assume that the price and average will come back down to a less inflated level later this month and into February. If you look at the chart above too it looks cyclical. At the start of 2015 AND the start of 2016 Aecom fell a significant amount. The past isn't a perfect representation of the future, not a Whig, so that may not happen this year. Who knows how we'll all react once Trump actually takes office on January 20th. 

     In Aecom's last quarterly earning they missed estimates by $0.06. Actual was $0.65 and estimates were $0.71. Before that they had beaten the estimates for the last 3 quarters. Their Q4 estimated EPS is $0.53 and many companies belief they will beat it AND have positive guidance for the next quarter. The results will be coming out during the second week of February. 

     Most recently, Robert W. Baird Group upgraded Aecome from neutral to outperform and increased it's price target from $42 to $45. 1 being strong buy and 5 being strong sell, Yahoo! Finance rated ACM as a 2. TheStreet ranks them as a B- which by their standard is a buy.  

     So there ya go. This is the Monday post. I'll be working on the next few and should be posting one a day for this week. 

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