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A survey of North American equities heading in both directions

On the rise

AtkinsRéalis (ATRL-T) jumped 8.2 per cent higher on Friday after it more than doubled its profit last quarter and raised its financial forecast for the year as the company shifts to growth and rounds out its transition to a pure-play engineering firm.

The company formerly known as SNC-Lavalin Group Inc. — whose massive, overbudget construction projects several years ago wound up draining coffers and pushing a round of cuts — notched a record backlog in its third quarter.

The figure hit $12.5-billion as of Sept. 30, driven higher by government contracts for energy and transportation projects in Canada, the United States and the United Kingdom.

“We continue to see exponential demand for our services in these markets, fuelled by the need to replace aging infrastructure and provide clean, affordable solutions for the built environment,” CEO Ian Edwards told analysts on a conference call Friday.

The growing backlog includes recent wins such as a $141-million electric-vehicle battery plant contract in Becancour, Que., transportation work in the U.S. and a fresh agreement with the U.K. defence ministry, Edwards said.

The Montreal-based company is currently working or bidding in eight U.S. states, he said. AtkinsRealis eventually aims to employ 10,000 staff south of the border, up from about 4,500 now.

“Our strategy is to get us to a top 10 player in the U.S. We’re currently ... around 17,” Mr. Edwards said.

To fulfill its global backlog, the company took on an additional 1,200 employees last quarter.

It also grew its nuclear revenue and backlog 23 per cent year over year. Mr. Edwards pointed to the Ontario government plan to build a new nuclear station at Bruce Power on the shores of Lake Huron, on top of the ongoing refurbishment of the Toronto-area Darlington nuclear plant, where Atkins subsidiary Candu Energy secured a four-year, $20-million contract last year.

AtkinsRealis boosted its outlook for the year on Friday, saying it expects organic revenue for its services business to grow between 15 per cent and 17 per cent, up from earlier expectations of 12 per cent to 15 per cent.

Net income from continuing operations amounted to $105-million or 60 cents per diluted share for the quarter ended Sept. 30, up 178 per cent from a profit of $44.7-million or 25 cents per share in the same period last year.

Revenue for the quarter grew 15 per cent to $2.20-billion from $1.89-billion a year earlier.

On an adjusted basis, the company’s professional services and project management business earned 38 cents per diluted share for the quarter, up from an adjusted profit of 30 cents per share a year earlier.

The outcome beat analyst expectations of 36 cents per share, according to financial markets data firm Refinitiv.

Shares of Edmonton-based engineering services provider Stantec Inc. (STN-T) were higher by 8.6 per cent on Friday following better-than-expected results and a guidance raise.

For its third quarter of fiscal 2023, it reported net revenue of $1.317-billion, up 14 per cent year-over-year and 4 per cent higher than the Street’s expectation of $1.271-billion. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and earnings per share of $241.3-million and $1.14, respectively, were also stronger than anticipated ($218-million and 97 cents).

The company now expects year-over-year adjusted EPS growth of 22-25 per cent, up from 12-15 per cent previously, with adjusted EBITDA as a percentage of net revenue at 16.7-17.1 per cent, up from 16.3-16.7 per cent.

Seeing Stantec “running on all cylinders,” National Bank analyst Maxim Sytchev called the release a “straightforward beat” in a note released before the bell.

“Stantec saw all regions and business lines deliver positive organic growth for the quarter on improved utilization rates,” he said. “Combined with prudent cost control, margins continued to expand as positive operating leverage provided enough torque to the bottom line for management to raise full-year guidance once again. Solid project execution, a higher number of resolved change orders, and lower than expected administration and marketing costs also helped here. For the top line, the Canadian market is proving significantly more resilient than expected at the start of the year and management now expects organic growth to be in the mid-to-high single-digit range on strength in the Water and Infrastructure verticals. Once again, Stantec’s exposure to fast-growing sectors and geographies combined with outstanding execution reiterate our confidence in the name as our top pick in the E&C space.”

“We have identified STN as our preferred engineering consulting idea for 2023 and results year-to-date have been more than delivering on those hopes (hence share price up 35 per cent vs. 1 per cent for TSX). U.S. at 54 per cent of top line is the company’s geographic engine while Environmental/Water skew as percentage of revenue is in the sweet spot where funds are flowing at the moment; importantly, we don’t believe this set-up will change over the next 24-36 months, barring a severe recession (as public funds are committed). We also believe that M&A once again will become part of the story in 2024E; the Dec. 5 Investor Day is bound to provide additional data points around the company’s capabilities, margin aspirations, M&A playbook, etc.”

Aurora Cannabis Inc. (ACB-T) jumped 6.6 per cent after saying it earned $256,000 in the second quarter, up from a loss a year earlier of $45.5-million.

The Edmonton-based cannabis company says net revenue for the quarter was $63.4-million, up from $48.6-million during the same quarter a year earlier and in line with the consensus expectation among analysts on the Street.

The company attributed the increase to growth in its global medical cannabis business and quarterly revenue in its plant propagation business.

CEO Miguel Martin says it was the company’s strongest fiscal year to date.

He says Aurora is experiencing the benefits of diversification across its cannabis and non-cannabis platforms.

The company’s net revenue from medical cannabis rose 42 per cent from a year earlier, while revenues from consumer cannabis were slightly lower.

ATB Capital Markets analyst Frederico Gomes said: “ACB reported Q2/FY24 results that were highlighted by margin improvements and the fourth consecutive quarter of positive adj. EBITDA. Revenue of $63.4-million was in-line with consensus and fell 15.6 per cent quarter-over-quarter, driven by weak seasonality in the propagation segment, partially offset by strength in medical sales (up 5.3 per cent quarter-over-quarter and 41.6 per cent year-over-year). Consumer cannabis sales of $12.0-million (down 9.5 per cent quarter-over-quarter) were below our expectations of $13.2-million, with adj. EBITDA of $3.4-million coming in well above consensus of $1.1-million, largely driven by the gross margin beat (50.6 per cent vs. consensus of 40.6 per cent). Adj. gross profit for the quarter was $32.1-million (ATBe: $30.7-million; consensus: $25.6-million). Management re-iterated guidance for positive FCF by the end of calendar 2024, mostly through additional cost savings. We view the FCF guidance and margin strength constructively, but remain wary of the time lag to reach positive FCF while the Company continues to burn cash (ACB burned ~$35mm during the quarter). We have lowered our near-term consumer cannabis estimates given Aurora’s focus on international markets, while raising our propagation revenue and margin estimates due to management’s more constructive view on the segment’s growth. With over $200-million in cash, and the repayment of $64-million of convertible senior notes since Q1/FY24 end (albeit with additional share dilution), we think that ACB has one of the strongest balance sheets in the industry. However, given the lack of near-term sales growth drivers and catalysts, in our view, and the distance to the FCF target, we maintain our neutral stance on the stock.”

Sleep Country Canada Holdings Inc. (ZZZ-T) erased early losses and closed up over 2 per cent after the retailer reported a year-over-year earnings per share decline of 15 per cent in the third quarter as difficult macroeconomic conditions continued to weigh on results.

Late Thursday, it reported EPS of 76 per cent, a penny below the consensus projection on the Street and down from 89 cents a year ago as same-store sales growth declined 5.5 per cent year-over-year. Revenue was up 1.9 per cent from the previous year to $255.748-million, also missing expectations ($258.1-million).

“For the first time in the last 5 quarters, sale of mattresses increased year-over-year, helped by acquisitions,” said Stifel analyst Martin Landry in a note. “Overall, while these results are not great, with EPS down 15 per cent year-over-year, Canadians are delaying their purchases of mattresses, and these sales are not lost, in our view. Hence, at some point, there may be pent-up demand for mattresses. We expect ZZZ’s shares to be flat to up on the back of these results [Friday].”

On the decline

Algonquin Power & Utilities Corp. (AQN-T) closed flat with the premarket release of third-quarter results that fell narrowly below the Street’s expectations.

The Oakville, Ont.-based company saw revenue fall 6.3 per cent year-over-year to $624.70-million. Analysts were expecting $676.5-million.

Adjusted earnings per share of 11 cents was a penny below the consensus forecast.

Through Thursday, Algonquin shares were down 5.6 per cent this quarter and 14.3 per cent year-over-year.

Saputo Inc. (SAP-T) declined 5.9 per cent after saying it earned $156-million in its second quarter, up from $145-million a year earlier.

The Montreal-based company says revenues for the quarter ended Sept. 30 were $4.3-billion, down from$4.5-billion during the same quarter last year.

Earnings per diluted share were 37 cents, up from 35 cents a year earlier.

Saputo says overall sales volumes were stable in its second quarter despite continued softening of global demand for dairy products, with higher domestic sales volumes more than offsetting lower volumes on the export side.

The company says during the rest of the financial year it expects to benefit from the carryover impact of price increases as well as other initiatives.

It also expects near-term inflation on its overall input costs to moderate, but remain elevated.

Altus Group Ltd. (AIF-T), a Toronto-based provider of asset and fund intelligence for commercial real estate, dropped almost 22 per cent with the release of third-quarter results after the bell on Thursday that fell short of expectations, leading four analysts on the Street to downgrade its stock.

Altus reported revenue for the quarter of $185.2-million, falling short of the consensus projection on the Street of $197.3-million. Adjusted EBITDA of $29.7-million also missed expectations ($37.2-million). While organic recurring revenue was up 13.7 per cent year-over-year, new bookings slid 17.3 per cent.

Concurrent with the quarterly release, Altus announced it has signed definitive agreements to acquire Situs Group, LLC, a commercial real estate valuation and advisory services business known as REVS, for total consideration of US$225-million and Forbury Property Valuations Solutions Limited, a CRE valuation software provider in the Asia Pacific region, for an undisclosed amount.

“Altus reported lackluster results alongside a large acquisition that will lever up the business while scaling the Analytics segment,” said Eight Capital analyst Christian Sgro. “Given continued market uncertainty, leading metrics could reasonably be reaching trough levels; however, we think there is a higher potential for some of this softness to persist through 2024. We think a ‘wait and see’ approach is prudent in the near-term, with full confidence that Altus is unlocking significant strategic value when market conditions improve.”

Park Lawn Corp. (PLC-T) fell 3.5 per cent with the release of weaker-than-expected third-quarter results as lower cemetery sales led to a decline in organic growth

The Toronto-based company reported earnings per share of 15 cents, falling 32 per cent year-over-year and below the Street’s 21-cent estimate as high financing costs for recent acquisition continues to weigh.

“Revenue growth from comparable operations declined 4 per cent year-over-year, better than our expectations of a decline of 5.8 per cent year-over-year,” said Stifel analyst Martin Landry. “The decline comes from lower comparable cemetery sales, which faced a difficult comparable year-over-year, coupled with a decision to halt the development of one cemetery, resulting in the cancellation of a large group contract. Funeral call volumes declined 5 per cent year-over-year, worse than our expectations of a decline of 2 per cent but were offset by a 6.7-per-cent year-over-year increase in average revenue per service. Since Q2/23, PLC closed/announced four acquisitions, bringing its total year-to-date to seven. This translated into higher revenues than expected but Q3/23 EBTIDA came-in in-line with expectations. We expect PLC’s shares to be flat [Friday] on the back of these results given the recent weakness.”

Heroux-Devtek Inc. (HRX-T) dipped 0.7 per cent after saying it earned $4.6-million in its latest quarter, down from $4.8-million in the same quarter last year, as its revenue rose nearly seven per cent.

The Quebec-based aircraft landing gear manufacturer reported adjusted earnings per share of 14 cents per share for the quarter ended Sept. 30, matching the consensus expectation on the Street and the result from the same period a year earlier.

Revenue for what was the Heroux-Devtek’s second quarter totalled $141.5-million, up from $132.7-million in the same quarter last year but narrowly below analysts’ projection of $145-million.

The company says civilian sales rose 29.8 per cent to $53.6-million in the quarter, boosted by increased deliveries for the Boeing 777 and Embraer Praetor programs, while defence sales fell 3.8 per cent to $87.9-million due to delayed deliveries for the Boeing F-18 program.

On an adjusted basis, it says it earned 14 cents per share in its latest quarter compared with an adjusted profit of 10 cents per share a year earlier.

“From a trading standpoint, we expect a neutral reaction as HRX is subject to aerospace seasonality (1H is typically weaker than 2H), and management emphasized previously that it plans to invest and carry more inventory to enable the company to stabilize the production system (inventories were at $303-million versus $287-million last quarter and $231-million in 2Q FY23),” said Desjardins Securities analyst Benoit Poirier. “We expect a working capital release in 2H23.”

Canopy Growth Corp. (WEED-T) slipped 1.4 per cent after saying its net loss for the second quarter was $324.8-million, compared with $305.8-million a year earlier.

The company says its net loss from continuing operations was $148.2-million, compared with $196.5-million during the same quarter last year.

Revenues for the quarter were $82.1-million, down from $100.4-million a year earlier.

The company says its Canadian cannabis business delivered its third consecutive quarter of organic revenue growth while significantly reducing costs.

This September, the company obtained creditor protection for BioSteel Sports Nutrition Inc. and said it intends to sell the business.

In August, the company announced it had signed a deal to sell the Hershey building in Smiths Falls, Ont., back to the chocolate maker for around $53 million.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/05/24 4:00pm EDT.

SymbolName% changeLast
Algonquin Power and Utilities Corp
Altus Group Ltd
Snc-Lavalin Group Inc
Aurora Cannabis Inc
Canopy Growth Corp
Park Lawn Corp
Saputo Inc
Stantec Inc
Sleep Country Canada Holdings Inc

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