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Why AECOM Technology Stock Spiked 14.8% Today

By Rich Smith – Nov 14, 2016 at 3:41PM

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Investors really love infrastructure stocks lately.

AECOM has been named as a contractor on multiple parties' Hyperloop projects. Image source: SpaceX.

What happened

Shares of AECOM Technology (ACM 0.42%) spiked 14.8% in early Monday trading, and as of 3:15 p.m. EST, were still holding on to 13.1% gains.

So what

AECOM is one of the biggest names in American construction and engineering. It's purported to be a key player in construction of Elon Musk's proposed Hyperloop transportation system, for example. Knowing that, if you guessed that AECOM would be a prime beneficiary of the boom in infrastructure stocks that's been going on ever since Donald Trump was elected'd be right.

From Trump's election through the end of last week, AECOM stock tacked on 15% to its market capitalization. This morning AECOM reported fiscal Q4 and full-year earnings, and the subsequent rise in stock price promises to nearly double last week's gain -- not because of earnings, but in spite of them.

Fact is, AECOM's earnings report was pretty terrible. Whereas Wall Street had expected the company to report $0.74 per share in pro forma earnings for fiscal Q4, the best AECOM could come up with was $0.65. Actual GAAP earnings, meanwhile, were a mere $0.05.

Revenue-wise, the company likewise fell short, reporting $4.32 billion where the Street had anticipated $4.68 billion. And to wrap up the trifecta of poor news, AECOM guided investors to expect somewhere between $2.70 and $3.10 per share in profits in fiscal 2017. Wall Street had been looking for $3.24 per share.

Now what

And yet, investors remain enthused about AECOM. Apparently, comments from AECOM CEO Michael Burke to the effect that the company "entered fiscal 2017 with strong momentum, and our confidence in the long-term trajectory of our business has never been greater," when combined with last week's election results, have been enough to -- ahem -- trump the actual numbers that AECOM is guiding investors to expect.

Will these investors be proven right, though? With AECOM now trading at more than 50 times earnings, I wouldn't bet on it.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he currently ranks No. 314 out of more than 75,000 rated members.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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