Is Aecon Group a purchase?

Newhaven Asset Administration portfolio supervisor Rebecca Teltscher stated Aecon Group is well-positioned for long-term progress because it strikes previous value overruns tied to pandemic-era fixed-price contracts and builds on a document mission backlog.

Talking on BNN Bloomberg’s Market Name on Oct. 6, Teltscher stated the inventory has been extra unstable than ordinary in recent times due to legacy contracts signed across the pandemic, together with the Eglinton LRT, the Gordie Howe Bridge and Coastal GasLink initiatives. These initiatives have been hit by provide disruptions, delays and value overruns throughout the pandemic.

“We’re actually on the very, very tail finish of that,” she stated.

Coastal GasLink is now settled, whereas the LRT and Gordie Howe initiatives are anticipated to wrap up by late 2024 or early 2025. Lower than 1% of Aecon’s present backlog is tied to those contracts, although the corporate has allowed for about $150-million in further potential losses. Teltscher stated there’s a likelihood they might exceed that, however she expects the overhang from these initiatives to fade as they’re accomplished.

She stated that Aecon’s backlog is at a document excessive of greater than $10-billion, with $1-billion added in the newest quarter alone. A lot of that progress is coming from the utilities phase, together with main nuclear refurbishment initiatives in Ontario. Teltscher stated potential nuclear contracts exterior Ontario may present further upside within the coming years, alongside elevated public-sector transportation funding.

Aecon has additionally accomplished two smaller U.S. acquisitions within the industrial area, sourced by means of current Canadian purchasers with U.S. operations in sectors equivalent to oil and mining. Teltscher stated these acquisitions will assist diversify Aecon’s enterprise past Canada.

“I do suppose that the inventory is poised to develop larger,” she stated, including that Aecon presently presents a 3% dividend yield, down from 6% when her agency first invested, however she expects additional dividend progress forward.

Aecon shares have gained about 14% over the previous yr and 77% over the previous 5 years. Of the analysts overlaying the inventory, eight fee it “Purchase,” three “Maintain,” and none “Promote,” with a consensus goal worth of $24.82.

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