North American Construction Group Ltd. (NOA-T) shares are rising after the heavy civil construction and mining contractor’s latest earnings beat expectations and the company increased its outlook for 2021 amid an anticipated economic recovery.
Shares of the Acheson, Alta.-based company rose more than 12 per cent to $15.24 in midday trading on the Toronto Stock Exchange Thursday and are up more than 20 per cent over the past five days. Over the past year, the stock has traded between a low of $5.81 in April and a high of $15.25 last February, before the pandemic curtailed its operations amid a dramatic economic slowdown.
PI Financial analyst Devin Schilling, who has a “buy” recommendation on the stock and $17 price target, said the stock is moving higher on the earnings beat and improved outlook.
“The market is also appreciating NOA’s diversification progress to-date as the company is strategically diversifying its business outside the oil sands and into new resources, geographies and customers,” he said in an e-mail to the Globe. NOA is the company’s stock symbol.
“We anticipate the diversification strategy will result in more investors taking a look at NOA,” Mr. Schilling added. “The company’s execution record and financial performance have been remarkable and we expect further diversification could result in a valuation re-rating moving forward.”
After markets closed on Wednesday, the company said its fourth-quarter revenue came in at $136.8-million, which was down from pre-pandemic levels of $189.5-million a year ago but ahead of analysts’ expectations of $128.6-million, according to S&P Capital IQ.
Net income for the quarter ended Dec. 31 was $10-million or 32 cents per share versus $8.2-million or 28 cents a year ago. Adjusted earnings came in at 36 cents versus 38 cents a year earlier and ahead of expectations of 27 cents. Adjusted earnings before interest, taxes, depreciation and amortization (EBIDTA) was $46.2-million versus $47.8-million a year ago and beat expectations of $35.4-million.
The company also raised its outlook for a handful of metrics: Adjusted EPS guidance for fiscal 2021 increased to a range of $1.60 to $1.90 per share versus $1.60 to $1.70 previously and compared to $1.73 for 2020. The adjusted EBITDA forecast for 2021 was increased to $165-million to $205-million from $155-million to $170-million and compared to $175-million in 2020.
BMO Nesbitt Burns analyst John Gibson, who has an “outperform” rating (similar to buy) on the stock and $17 target, said operating hours across the company’s fleet were up 35 per cent quarter-over-quarter, “while utilization continues to recover from the pandemic.”
He also said the company has identified a $3-billion bid pipeline for new work, including several larger awards in the $100-million range that are actively being tendered.
In a note, he said the company’s core oil sands operations “continue to trend up out of the pandemic, while its diversification into non-oil sands work is paying dividends.”
ATB Capital Markets analyst Tim Monachello, who has an “outperform” rating and $16.50 target price, said in a note the company’s strong result “was largely due to a faster-than-anticipated normalization in oil sands related activity which was reflected in significantly improved fleet utilization,” compared to lows in the second quarter of 2020.
He also said a quicker rebound in oil sands activity is positive for the company’s near-term outlook.
“We liked what we saw in the quarter and continue to see tremendous value in [the company’s] shares,” Canaccord Genuity analyst Yuri Lynk said in a note. He has a $20 price target, raised from $16 earlier this week, and “buy” on the stock.
“We believe that as a greater proportion of earnings are generated outside the oil sands, the company’s valuation will improve,” Mr. Lynk wrote.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.