By Doug Cameron and Joshua Jamerson
Infrastructure projects backed by state ballot initiatives and higher gasoline taxes will drive a surge in domestic spending even before any bump from the new administration's spending pledge, the chief executive of Aecom said Monday.
Michael Burke said voters last week passed $200 billion in infrastructure projects being tracked by the Los Angeles-based company that are expected to spur rapid growth in 2018.
President-elect Donald Trump's election-night focus on boosting spending on domestic infrastructure drove a rally in construction-related stocks last week that continued Monday, despite uncertainty over the incoming administration's specific funding plans and priorities.
Mr. Burke said expected changes in energy policy were expected to reverse some of the weakness in segments such as pipelines, but state-funded projects already provided reason for optimism.
"I don't think we've ever been more bullish on the future of infrastructure in North America," Mr. Burke said on a call after Aecom reported quarterly profits that undershot analysts' expectations alongside guidance for next year that also fell short.
State and local spending typically accounts for 75% of the public sector share of domestic infrastructure investment in projects such as roads and water treatment facilities, with the federal budget paying for the balance.
Mr. Trump had pledged on the campaign trail to invest $1 trillion over 10 years on a variety of infrastructure projects if elected, and analysts said his win could ease the passage next year of an infrastructure spending bill already being considered by Congress.
The plans hinge on unlocking more private sector spending that is dependent on establishing revenue streams such as road and bridge tolls to pay down debt as well as securing regulatory approvals and public sector contributions.
Aecom shares climbed after Mr. Burke's remarks, having nursed an early loss following the 2017 guidance. Shares were up more than 6.4% at $34.29 in Monday afternoon trading.
The company forecast adjusted profit in 2017 in a range of $2.70 to $3.10 a share, compared with the consensus estimate from analysts of $3.24 a share, according to FactSet. Fourth-quarter profits rose to $7.2 million, or a nickel a share, up from $1.1 million, or a penny a share. Revenue fell to 8% to $4.3 billion.
Mr. Burke said Aecom's $6.3 billion in contract wins for the quarter, including work on the new stadium for the Los Angeles Rams football team, were a record.
The company's results in its year ended in September were hurt by "uneven client spending" in Aecom's Americas business, Mr. Burke said, as well as pressures from low oil and gasoline prices. Mr. Burke also blamed underwhelming performance on less-than-expected earnings contributions from sizable power and industrial construction wins in the second half of the year, because of timing.
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