SNC-LAVALIN GROUP INC. $50(Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $7.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.snclavalin.com) is a leading Canadian engineering and construction company. It specializes in large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants.
SNC recently bought the 23.08% of AltaLink L.P. that it did not already own. The company now owns 100% of AltaLink, which provides electricity to 85% of Alberta’s population through 12,000 kilometres of power lines and 270 substations.
AltaLink’s long-term outlook is bright, partly because new power lines will have to be built to power Alberta’s expanding oil sands projects. In addition, AltaLink’s expertise should help the company compete for new power-infrastructure projects in other provinces.
SNC paid $228.8 million for this stake. That’s a large sum for SNC, which earned $125.6 million, or $0.83 a share, in the three months ended September 30, 2011. That’s down 2.0% from $128.1 million, or $0.84 a share, a year earlier. However, if you exclude a gain on the sale of an investment in the yearearlier quarter, earnings would have risen by 15.8%.
SNC continues to win new contracts. That’s why its revenue rose 17.7% in the quarter, to $1.8 billion from $1.5 billion. Its order backlog now stands at $9.4 billion, or 1.3 years worth of revenue.
The stock trades at 17.6 times SNC’s likely 2011 earnings of $2.84 a share, and at 15.0 times its forecast 2012 earnings of $3.33 a share.
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