Pat McKeough responds to many requests from members of his Inner Circle for specific advice and stock tips as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.

Recently an Inner Circle asked us about a Canadian stock whose service vehicles are a familiar sight on Canadian streets and highways. Aecon Group develops infrastructure through three different groups, Energy, Infrastructure and Mining. Pat examines the contribution each of the three groups makes to the company’s business. He also looks at three new projects Aecon has added recently and whether it can continue to add new contracts.

Q: Hi Pat: How do you feel about investing in Aecon? Thank you.

A: Aecon Group Inc. (symbol ARE on Toronto; www.aecon.com) is one of Canada’s largest infrastructure developers. Aecon and its predecessors built Canadian landmarks like the CN Tower, the St. Lawrence Seaway, the Calgary Olympic Oval and the Halifax Shipyards.

Aecon has three main divisions:

The Energy Group, which accounted for 54% of the company’s revenue in the latest quarter, builds various facilities and components for clients in the power industry, including nuclear reactors.

The Mining Group (23% of revenue) develops, builds and maintains mines and oil and gas properties. It also builds related infrastructure, like roads and waste management systems, and helps its clients restore their sites and plant new trees.

The Infrastructure Group (23% of revenue) builds roads, bridges, tunnels and public transit projects. It also sells asphalt and aggregates (crushed stone and gravel), key ingredients for making concrete.

In addition, the company develops, finances and operates public infrastructure projects. It currently holds a 45.5% interest in a 35-year concession on Ecuador’s Quito International Airport. Concessions are rights that governments grant to run public facilities.

Holdings like this can be highly attractive. For example, SNC-Lavalin has had great returns from its interest in Ontario’s 407 toll highway.

Fort Hills oil sands project one of three new contracts totalling $223 million

In the three months ended March 31, 2014, Aecon’s revenue fell 18.6%, to $461.9 million from $567.4 million a year earlier. That’s partly because it completed a major mining contract in 2013. As well, severe winter weather in Ontario slowed work on infrastructure projects.

The company lost $24.7 million, or $0.47 a share. That’s an improvement over its year-earlier loss of $28.3 million, or $0.53 a share. Aecon typically loses money in the first quarter, a slow period for construction.

New bookings jumped to $867 million from $212 million. On March 31, 2014, Aecon’s order backlog was $2.2 billion, up 5.1% from a year ago. The company expects to complete 56% of its backlog within the next 12 months.

K+S Potash Canada recently hired the company to help develop its Legacy mine in Saskatchewan. Lafarge Canada has also awarded Aecon a contract to build certain structures at its Exshaw cement plant in Alberta. In addition, the company will help develop the Fort Hills oil sands project. In all, these three deals are worth $223 million.

As of March 31, 2014, the company’s long-term debt was $365.8 million, or 38% of its market cap. It also held cash of $146.5 million, or $2.75 a share. Its $0.36 annual dividend yields 2.1%.

In the Inner Circle Q&A, Pat looks at Aecon’s earnings outlook and whether the company can continue to add new contracts to keep its order backlog rising. He concludes with his clear buy-hold-sell advice on this stock.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members

Stocks that work in construction and infrastructure obviously have less work in winter, and when the economy slows down. But have you found stocks in this business that were strong long-term investments, despite the seasonal and cyclical fluctuations?