The Successful Investor Hotline – Friday, October 18, 2013

Article Excerpt

SNC-LAVALIN GROUP INC., $42.59, Toronto symbol SNC, fell 5% this week after it cut its 2013 earnings outlook, mainly due to one-time losses on certain fixed-priced engineering contracts it signed between 2010 and 2012. The nature of these deals, which include hospitals, roads and unspecified projects in North Africa, prevents SNC from passing along unexpected cost increases to its clients. The company also expects that a previously announced reorganization of its European operations will cost an extra $75 million. At the same time, weak prices for gold and other commodities have slowed construction of new mining projects. As a result, SNC will probably earn $10 million to $50 million in 2013. That’s a big drop from its earlier prediction of $220 million to $235 million. The company’s new management is now focusing on contracts with better profit potential. SNC also plans to expand its services business, which gives it more predictable revenue streams than designing and building projects. However, these moves may not succeed…