On Thursday, CFRA raised its stance on ACS Actividades de Construccion y Servicios SA (ACS:SM) (OTC: ACSAY) to Hold from Sell, while also increasing the price target to EUR40.00 from EUR30.00. This adjustment comes on the back of a robust first quarter in 2024, where the company's comparable net income grew by 16% year-over-year to EUR178 million.
The growth was attributed to a strong performance in the Integrated Solutions sector, which saw a 25.5% increase due to a favorable mix of projects and supply chain services solutions.
The positive momentum was evident across various regions, with the American market growing by 9% and Europe by 8% compared to the same period last year. Additionally, ACS's backlog reached a new peak of EUR77.9 billion as of March, marking a 6% rise since the beginning of the year. This was bolstered by new order wins totaling EUR13.2 billion, which is 1.5 times the book-to-bill ratio, signaling a significant improvement from the EUR10.4 billion in order wins recorded in the fourth quarter of 2023.
ACS has provided guidance for an adjusted profit increase of 8% to 12% for the year 2024, maintaining its mid-term goal of achieving a net profit between EUR850 million and EUR1,000 million by 2026. In line with these developments, CFRA has revised its earnings per share (EPS) forecast for ACS, raising the 2024 estimate to EUR2.60 from EUR2.30 and the 2025 estimate to EUR2.95 from EUR2.45.
The upgrade to a Hold rating reflects the analyst's view of improving growth prospects for ACS, as well as the company's strategic expansion efforts in Europe, particularly through Turner. This strategic move is expected to further bolster ACS's position in the market and contribute to its growth trajectory.
InvestingPro Insights
The latest insights from InvestingPro further reinforce the positive outlook for ACS Actividades de Construccion y Servicios SA (ACS:SM) (OTC: ACSAY). The company's aggressive share buyback strategy and high shareholder yield are indicative of management's confidence in the firm's financial health and future prospects. Additionally, ACS is trading at a low P/E ratio of 13.04, which is attractive relative to its near-term earnings growth. This suggests that the stock may be undervalued, offering a potential opportunity for investors.
InvestingPro data shows ACS's robust revenue growth over the last twelve months as of Q4 2023, with a 6.32% increase, and a stable gross profit margin of 31.58%. Furthermore, the company's EBITDA growth of 58.19% during the same period signals strong operational efficiency. With a market capitalization of $11.26 billion and trading near its 52-week high, ACS's stock demonstrates resilience and potential for sustained performance.
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