Founded in 1997 and headquartered in Madrid, Spain, ACS, Actividades De Construcción Y Servicios, S.A., is a leading Spanish construction group. The company's main activity is the construction of highways, hydraulics, railroads, residential and non-residential buildings, as well as services like cleaning, waste management, maintenance, port logistics, social services, and industrial services including electricity, gas, water networks, telecom, and traffic control.

With over 157,250 employees, ACS operates primarily through four business segments: the Turner segment contributed 46% of FY 2024 sales; the Cimic segment contributed 25%; the Engineering and Construction segment accounted for 23%; Infrastructure and non-core activities segment represented 6% of the sales mix. The geographical distribution of net sales is as follows: Spain accounts for 8.7%, the United States for 57%, Australia for 21.2%, Canada for 3.9%, Germany for 2.4%, and other regions for 6.8%.

New orders drive surge in backlog

ACS reported a remarkable increase in its order backlog in Q1 2025, rising to €90.8bn (from €77.9bn in Q1 24), up 16.5% y/y. This rise was fueled by €15.6bn in new orders in Q1 25, compared to €13.2bn in Q1 24, reflecting an 18.3% y/y increase. The company secured significant awards in sectors such as data centers, healthcare, defense, and transportation, resulting in a Q1 25 book-to-bill ratio of 1.3x. Among the significant recent orders were a high-density, liquid cooling-ready 64 MW data center for a multinational technology corporation in Cyberjaya, Malaysia, the Logan and Gold Coast Faster Rail project, and Western Power electricity infrastructure works.

One notable development was Turner, a segment of ACS, opening a $250m state-of-the-art gummy production facility in New Albany, Ohio. In addition, ACS announced a substantial rise in capex, increasing from €219m in Q1 24 LTM to €448mn in Q1 25 LTM. This growth underscores the company's commitment to expanding its capabilities and infrastructure to meet the rising demand in various sectors.

Analysts forecast continued growth

ACS has posted a strong revenue CAGR of 14.4% over the last three years (FY 21-24), reaching €41.6bn in FY 24. Revenue growth was driven by good performance across all business segments. EBITDA grew at a CAGR of 19% to €1.5bn, with a margin of 3.5%.

ACS experienced a positive FCF over the last three years (FY 21-24), reaching €1,780m in FY 24 from €26.7m in FY 21. Cash and cash equivalent remained largely stabler over FY 21-24, at €11.4bn. However, total debt rose from €11.1bn to €14.3bn in FY 24. As a result, gearing, calculated as total debt-to-equity, also rose from 157.6% to 280.3% in FY 24.

In comparison, its local peer, Ferrovial SE, experienced a lower revenue CAGR of 9.8%, reaching €9.2bn in FY 24. However, Ferrovial's EBITDA grew at a higher CAGR of 30.2%, reaching €1.4bn, with a margin of 14.7%, which is higher than that of ACS.

Looking ahead, analysts anticipate revenue CAGR of 6.3% over FY 24-27, reaching €50bn. EBITDA is expected to grow at a CAGR of 11.5% to €3.4bn, with margin expanding by 90 bps to 6.8%. Net income is expected to grow at a CAGR of 6.6% to €1bn. EPS is expected to increase from €3.2 in FY 24 to €3.8 in FY 27. In comparison, analysts estimate an EBITDA CAGR of 10.1% and a negative net profit CAGR of 36.5% for Ferrovial.

Stock returns outperform peer

Over the past year, ACS's stock has demonstrated strong performance, delivering impressive returns of approximately 47.8%. In contrast, Ferrovial's stock yielded lower returns of 19.4% during the same period. Furthermore, ACS distributed dividends amounting to €1.99 per share in FY 24, resulting in a dividend yield of approximately 4%. Analysts project that ACS will maintain a dividend yield of around 4% over the next three years, indicating consistent shareholder returns.

The company is currently trading at a P/E of 19.5x, based on the FY 25 estimated EPS of €3. This valuation is higher than its three-year historical average P/E of 13x, yet it remains significantly lower than Ferrovial's P/E of 42.9x. Likewise, ACS is trading at an EV/EBITDA multiple of 5.2x, based on the FY 25 estimated EBITDA of €3,084m. This multiple exceeds its three-year historical average of 4.8x, although is considerably lower than Ferrovial's EV/EBITDA multiple of 25.5x.

AAC Technologies is generally liked by 16 analysts, with two issuing 'Buy' ratings and 12 assigning 'Hold' ratings, resulting in an average target price of €51. Despite this, the stock is currently trading 12.5% above its target price, driven by the stock's recent rally.

Overall, ACS experienced a significant increase in its order backlog and capex, underscoring its expansion initiatives. Despite a decline in net profit over the past three years, ACS achieved positive FCFs and enhanced ROE. Analysts project sustained growth in revenue, EBITDA, and EPS. However, the company is confronted with several risks, including geopolitical risks such as supply chain disruptions and shortages of building materials, as well as environmental challenges like water scarcity and biodiversity loss. Additionally, ACS faces operational risks related to bid and contract management, compliance issues, cybersecurity threats, and challenges in attracting and retaining talent.