Improved sales derived from past acquisitions helped generate a 22.9% revenue gain for this company during the most-recent quarter.
New contract wins should continue to add to the bottom line. Meanwhile, the stock trades at 21.0 times the company’s 2022 earnings forecast.
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STANTEC INC. (Toronto symbol STN; www.stantec.com) offers you exposure to a leading seller of consulting, project-delivery, and design and technology services. The company’s clients operate in a variety of industries, including oil and gas, transportation, and construction.
Stantec tends to use acquisitions to spur its growth. It cuts related risk by targeting smaller firms that are easy to absorb. Thanks to several purchases it completed in 2021 and this year, the company’s revenue in the quarter ended June 30, 2022, rose 22.9%, to $1.17 billion from $908.3 million a year earlier. If you factor out acquisitions, revenue improved 9.4%. The gains also helped lift Stantec’s earnings before acquisition-related costs and other unusual items by 33.9%, to $0.83 a share from $0.62.
Stantec is now buying L2P, a Philadelphia-based architectural firm that specializes in designing scientific laboratories and related facilities for corporate customers and educational institutions.
The company did not disclose the purchase price. However, L2P will enhance Stantec’s ability to serve clients that operate scientific research facilities.
Stantec’s strong reputation continues to help it win new contracts.
Growth Stocks: New high-profile contract wins boost profile and revenues
For example, the U.S. Navy’s engineering division (Naval Facilities Engineering Systems Command) has selected the company to help it manage its land and buildings in southern California.
This five-year deal is worth $30 million U.S. While that’s small next to Stantec’s annual revenue of $5.0 billion (Canadian), contracts like this should lead to more U.S. government deals in the future.
Another recent win includes Metro Vancouver, which consists of 23 municipalities and a First Nation, selecting Stantec to help design and manage the proposed Iona Island Wastewater Treatment Plant.
This $9.9 billion project includes building a new water treatment plant, as well as smaller facilities to connect it with existing infrastructure.
Stantec has not yet said how much it will earn under this contract. The new treatment plant should begin operating in 2035, and the rest of the project should be ready in 2038.
The company will probably earn $3.00 a share for all of 2022, and the stock trades at a reasonable 21.0 times that estimate.
Stantec last raised your quarterly dividend with the April 2022 payment. Investors now receive $0.18 a share, up 9.1% from $0.165. The new annual rate of $0.72 yields 1.1%.
Stantec’s dividend has grown at an average annual rate of 7.6% in the past five years. The stock holds an Above Average TSI Dividend Sustainability Rating.
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