The multinational engineering firm AECOM was recently served with a securities class action suit alleging that the company failed to disclose certain details about its operations and otherwise misled investors. To learn more about this case, visit Battea’s AECOM case summary.
Specifically, the class action filing alleges that AECOM made a number of materially false and misleading statements about the company employing fraudulent or deceptive business practices, that it didn’t have effective controls for internal financial reporting, that it overstated how beneficial acquiring another company (URS Corp.) would be to its bottom line, and to its free cash flow per share. As a consequence of not disclosing these issues, it is alleged the details in the company’s public statements were false and misleading. The suit has a class period from Feb. 11, 2015, to Aug. 15, 2016.
In its third-quarter financial reporting, AECOM revealed revenue of $4.4 billion, but that was below the company’s original projections, as it originally said it expected to generate about $4.52 billion in revenue, according to a report from The Street. This issue led its stock to take a bit of a hit over the next several days, even as other aspects of the company’s financial reporting remained fairly strong. For instance, the firm’s adjusted earnings per diluted share came in at 81 cents, well above Wall Street expectations of 70 cents a share, as well as an improvement of 7 cents per share on an annual basis.
“Our performance in the third quarter reflects the benefits of our diverse mix of geographies and end markets,” Stephen Kadenacy, AECOM’s president, said in reporting the financial details. “From this diversity, and through consistent execution, we are able to generate consistent results and deliver value for our stockholders.”
However, the firm has experienced troubles with URS, which it acquired in late 2014. In fact, some of the issues were so significant that at the end of August, about two weeks after the class period on this suit came to an end, the U.S. Government Accountability Office recommended that the U.S. Navy pull out of a contract it awarded to URS, according to the Washington Business Journal. The basis for this recommendation seems to be that URS’s bid to win the contract was lower than it should have been based on the fact that it was counting on URS being able to use government workspace, which it had previously been told was not going to happen.
The effect on stock prices
On Aug. 15, AECOM’s stock stood at $35.09 per share, but quickly fell over the next two days to about $31.97. The downward trend continued throughout August and into mid-September. On Sept. 20, it reached a trough of just $27.60 per share. At a few points in October, it fell even below that mark, and currently stands at $27.85 per share. The company’s year-to-date high, observed in late July, was $36.17 per share.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or firstname.lastname@example.org.